For quite some time now people have been talking to me about their concerns regarding how their services are used by their clients and last year I asked this question at a P&L conference if I remember rightly – what happens if a client abuses liquidity with one of your algos? It’s a hard one […]
Tag: market abuse
Regular readers know that the increasingly blurred lines between retail and institutional FX markets have bothered me for years. Too many customers are unsuccessful in the retail sector and the reputational risk for the entire industry is off the scale. We need to be asking many more intrusive and difficult questions of these firms – for if we do, I think the answers – assuming they are given honestly – will highlight the scale of the problem and help deliver a solution.
One of the problems with being associated with a subject for several years is that you can feel the issue and the debate is getting a little tired just when a lot of other people start getting involved. I feel this way about last look, but rather than bang on about it yet again I thought it might be worthwhile looking at how the industry got itself into this mess in the first place – and, possibly, how it can avert further damage.
Speaking at Profit & Loss’ Forex Network London, Paul Chappell, CIO of buy side firm C-View, explained how liquidity trends are being negatively impacted by the Fix scandal.
In a featured new segment introduced at Profit & Loss’ Forex Network London called BURSTS, Paul Chappell, CIO of buy side firm C-View, sought to explain liquidity trends in the FX market in the context of the recent scandals that have plagued the industry.
In this TED Talks-styled presentation, Chappell sought to address why there are, in his opinion, only a few genuine market makers left in the FX market that everyone else prices off, and why currency managers have seen their returns significantly reduced.
One of the key questions surrounding FX Global Code of Conduct, of which the second part is due to be released on May 25, is whether it would have actually prevented the scandals that have dogged the FX industry in recent years.
Brigid Taylor, global managing director of ACI, argues that it would have.
“In financial markets people say: talk is cheap but my word is my bond. So if I say that I’m going to do something then I need to understand what that means, I need to understand how to apply that knowledge and then I need to do it,” says Taylor, adding that this knowledge ensures accountability.
Where, indeed if, spot FX sits within the European Securities and Markets Authority’s Market Abuse Regime, MAR, has been the subject of speculation for some months. Earlier this year, ESMA issued an updated MAR document and again there was no mention of spot FX, however this did not stop some sounding concerns that the broader definition could mean spot FX is “in scope”. In a Q&A paper issued last week, ESMA appears to have provided some clarification – by mentioning spot FX explicitly.