Tag: options

options

BNY Mellon Takes the Next Step in Its FX Build-Out

Key to the announcement made today by BNY Mellon that it is launching an FX options desk is that the bank believes that this represents the next step in its transition to a “full-service” FX franchise.

“We’re transitioning from a custody FX business to a more traditional full-service FX provider,” Adam Vos, global head of FX at BNY Mellon Markets, tells Profit & Loss. “As such, FX options was a key deliverable along this journey because it means that we can now meet more of our
client’s trading and hedging demands. It’s very important that they no longer have to go somewhere else for this activity, they can trade options – as well as other products – directly with us.”

Could the Shift to Clearing Alter FX Market Structure?

Although there are clear drivers pushing more FX products into central clearing, this is unlikely to have a significant impact on market structure, says Paddy Boyle, the head of ForexClear, LCH.

“The pressure to clear for banks that are subject to bilateral initial margin rules is very, very high and we have banks who tell us they’ve been cut off by other banks because they weren’t clearing,” he says.

That, explains Boyle, is one of the negative drivers towards central clearing, while on the positive side there are lower capital costs, lower initial margin requirements and fewer credit line restrictions for firms that choose to use clearing services. As a result, Boyle predicts that cleared FX volumes will increase “pretty significantly” going forward.

Built to Become Big

Galen Stops takes a look at how and why Aston Capital Management is planning to scale up following its recent $100m investment. 

Aston Capital Management recently received an injection of $100 million in AUM and an additional $5 million in seed operating capital from private investors.  Following this investment, the firm’s CEO Isaac Lieberman is, perhaps unsurprisingly, bullish about its future.

“We have a goal through our strategic mandate and product development timeline to have capacity to be managing $2 billion in AUM within two years and I can actually see us achieving this goal quickly as this business accelerates,” he says.

To help achieve this goal, Lieberman has deliberately been structuring the firm so that it can easily scale up in the future. For starters, the firm has been getting a whole slew of regulatory and accountancy registrations in place.

FIA Data Highlights Stagnant FX Futures Volumes

New data from the Futures Industry Association (FIA) highlights the lack of significant growth in the volume of FX futures trading over the past several years.

According to the FIA data, 2.1 billion currency futures contracts were traded in 2017, and while this represents a 302% increase from the 2008 volumes – which is as far back as the FIA data provided goes – this hardly tells the whole story.

The data shows that between 2009 and 2010 the volume of FX futures traded jumped 160%, from 950 million contracts to almost 2.5 billion. What drove this sudden spike in trading volumes?

Is the Stage Finally Set for FX Clearing?

Galen Stops takes a look at whether the predictions of FX moving towards a centrally cleared model might finally be coming true. 

Central clearing for FX has endured a number of false dawns in recent years. As long ago as 2011, Profit & Loss published an article, “FX Clearing – Are You Ready?” in which it was argued that Dodd-Frank was likely to drive FX options and NDFs products into clearing.

Then back in the first quarter 2014, staff at the US Commodity Futures Trading Commission (CFTC) indicated that the guidelines for the mandatory clearing of FX derivatives products, which included NDFs could be finalised within weeks. Indeed, Profit & Loss reported in mid-June 2014 that the CFTC was poised to fire the starting gun for mandatory FX clearing.

OTC FX Options Clearing: Are Prime Services Ready?

They may both have been a long time in the pipeline, but the wait for CME and LCH’s introduction of OTC FX options clearing services is nearly over. Yet with both due to launch before the end of 2017, just how much appetite is there likely to be from the prime services sector to support these initiatives? Nicola Tavendale writes.

While there are many different ways institutions can try to reduce their capital costs, clearing is by far the most efficient, according to Paddy Boyle, head of ForexClear at LCH. And even before the advent of the uncleared margin rules, there were already significant benefits to clearing non-deliverable forwards (NDFs), both in terms of enhanced risk management and obtaining operational and capital efficiencies, he adds. “Since the uncleared margin rules were implemented in September 2016, clearing has become a much bigger priority for many firms,” Boyle says.

Bilateral Margining Driving Growth at LCH

Clearing house LCH says its ForexClear service has seen 10 entities turn to actively clearing FX non-deliverable forwards in the past six months and that it has experienced a “significant” rise in cleared notional and trade count in 2016, with over $220 billion in notional cleared to date in September 2016.

As of 23 September, the firm says over $1 trillion in notional has been cleared in 2016.

“The uncleared margin rules that are coming into force across the world have been a catalyst for driving eligible and appropriate derivatives trades towards central clearing,” says Daniel Maguire, LCH’s global head of rates and FX derivatives.

Is it Time to Re-Write How FX Infrastructure Works?

After a number of years having to take reactionary measures in response to new regulatory requirements, panellists at Profit & Loss’ Forex Network New York conference expressed enthusiasm for a new wave of innovation that has the potential to re-shape FX market infrastructure. “Perhaps for the first time in eight years, innovation is back on […]