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Lizzy Birmingham provides a brief roundup of the major FX moves this week, and the drivers behind each. 1) Pound Temporarily Bounces Back after May’s Resignation Today, British Prime Minister (PM) Theresa May announced her resignation, set for Friday, June 7. May’s announcement comes after three failed attempts to pass a Brexit deal, confirming mass-speculation […]
Lizzy Birmingham provides a brief roundup of the major FX moves this week, and the drivers behind each. 1) GBP Plummets Amid Uncertainty The British pound has hit a four month low. The continued drop in value has been caused by opposing parties failing to create Brexit deal and the looming resignation of Prime Minister […]
A new research note from CME Group looks at whether FX options skews can be used to predict where certain currencies will move relative to the US dollar.Written by Erik Norland, executive director and senior economist at CME, the research opens by explaining that options markets typically exhibit a skew, but that in different asset classes this skew can be in different directions.For example, Norland points out that out-of-the-money (OTM) put options on equity index futures are usually more expensive than OTM call options because investors fear a sudden decline in stock prices more than a sudden rise. However, the reverse is generally true for options on agriculture products because food buyers are more concerned with a sudden increase in the price of crops rather than a decline.
A storm is brewing in the world of FX derivatives. Driven by, surprise surprise, Brexit uncertainty and Trump – there’s a sizable chunk of activity in GBP/USD options relative to the other major currency pairs.
Now the geopolitical landscape is of course backed into the price of the underlying currency pair, as opposed to the activity of the options. But the challenge is that as volumes increase, investment banks have to inevitably pay more in interdealer broker (IDB) fees. And the bigger the volume, the bigger the brokerage cost. Already under intense scrutiny to reduce costs wherever possible, this is a major headache that any desk head could do without right now.
Gemini, the digital asset exchange and custodian founded by Tyler and Cameron Winklevoss, has launched a new cryptocurrency that is pegged to the US dollar.
The new cryptocurrency, called the Gemini dollar, is pegged 1:1 to the US dollar and is built on the Ethereum network according to the ERC20 standard for tokens.
Starting September 10, 2018 at 10am EST, it became possible to convert US dollars in a Gemini account into Gemini dollars and withdraw them to a specific Ethereum address. It is also possible to automatically convert Gemini dollars into US dollars by depositing them into a Gemini account.
The total volume of FX futures traded on SGX in July was 1.7 million, down 8% month-on-month, despite the exchange seeing record volumes in its USD/CNH futures.
Although volumes were down last month compared to June, they were still up 124% year-on-year. The monthly decrease appears to have been driven by a decline in volumes on SGX’s INR/USD futures, with trading down 23% m-o-m but still up 81% y-o-y.
The bright spot for SGX in July was trading on its USD/CNH futures, as a record $61.5 billion in notional was traded on these contracts, bringing the total volume of these contracts cleared to over $255 billion this year.
Singapore Exchange (SGX), is launching a new product, SGX FlexC FX Futures, with the aim of “futurising” certain OTC FX product offerings.
Targeted for launch on August 27, SGX FlexC FX Futures – developed in consultation with market participants – enable bilateral trades that are privately negotiated with tailored expiration dates to be registered and cleared like a standard SGX FX futures contract. This feature will be available for INR/USD, KRW/USD, TWD/USD, USD/CNH and USD/SGD contracts.
Michael Syn, head of derivatives at SGX, says: “Access to counterparty credit, especially for tenors longer than spot, is increasingly scarce and expensive in the OTC FX markets.
OTC Exchange Network (OTCXN), a blockchain-powered capital markets infrastructure company, today announced that it completed its first live test trades for the exchange of tokenised fiat currency and bitcoin.
The infrastructure provider says that it believes this to be the first time that tokenised US dollars and tokenised bitcoin have been exchanges between two separate trading accounts over an electronic trading platform with assets held in safekeeping at a neutral custodian and digitised on blockchain.
Currently, institutional traders usually conduct block trades of fiat currency and cryptocurrency over e-mail and chat, relying on the reputation and credibility of their counterparties to honor their part of the trades, often taking hours to confirm and settle. The OTCXN platform aims to remove trading counterparty and settlement risk with an atomic exchange of assets on high-performance blockchain and facilitates settlement of transactions instantly, not in hours or days.
The Bankers Association of the Philippines (BAP) and Bloomberg have announced a series of new initiatives aimed at furthering the growth of the FX market in the Philippines.
The BAP has appointed Bloomberg as the new calculation agent for the USD/PHP spot reference rate. The spot reference rate is frequently used as a benchmark by onshore and offshore banks, corporations and asset managers in the Philippines for trade execution, valuation and benchmarking of portfolios.
“We are pleased to partner with Bloomberg to provide enhanced solutions to the FX community in the Philippines,” says BAP’s managing director, Benjamin Castillo. “These new initiatives will support the Bangko Sentral ng Pilipinas’ (BSP) financial market development reforms to better organise and deepen the country’s FX market. We look forward to execution efficiency, increased market liquidity and transparency leveraging Bloomberg’s technology platform and industry best practices.”
The aggregate volume for SGX FX futures stayed above 1 million contracts, or approximately US$ 53 billion, for the full month, representing year-on-year (y-o-y) growth of 99.3%.
The average daily volume (ADV) of FX contracts traded on the exchange in February was 1.17 million. On a Year-to-Date (YTD) basis, this represents an increase of 123% over the corresponding period in 2017.
SGX’s USD/CNH futures saw a pick-up in activity last month, with 10 successive days of trading in excess of $1 billion, including two consecutive days of trading above $2 billion.
