The news this week that Citi served a 90-day notice to the largest non-bank market making firms in FX – including Jump Trading, XTX Markets, Virtu Financial, HC Technologies and, at an earlier point in time, GTS – that it is no longer willing to offer them FX prime brokerage (PB) services, certainly got tongues […]
FX market structure changes are behind a change in approach on the part of several non-bank market makers, and the direction of travel is very much the mainstream.
“The market structure has changed and our model has definitely changed with it,” said Laine Litman, head of Virtu Financial’s customised and disclosed liquidity offerings in FX and fixed income, in kicking off the second panel on liquidity provision at Profit & Loss Forex Network Chicago. “What liquidity consumers needed two or three years ago has changed and with that, we have had to look at our models as well as at how we interact with markets.
XTX Markets (XTX) has chosen Paris as its post Brexit European hub, although the firm says that its headquarters will remain in London.
XTX has filed an application with the Autorité de Contrôle Prudentiel et de Résolution, the French regulator, to operate a regulated firm in France.
In a release issued today announcing the decision, XTX says that is opening an office in Paris as part of its preparation for the UK’s exit from the European Union. The firms adds in the release that it is committed to maintaining and further developing its liquidity provision to clients, platforms and exchanges across the European Union.
There appeared to be a broad consensus in the responses to the Commodity Futures Trading Commission’s (CFTC) proposed swap dealer rules that the Commission should retain the current $8 billion de minimis threshold for swap dealer (SD) registration and that NDFs should be excluded from the threshold calculations.
Since 2012, Commission regulations have stated that market participants will not be considered a “swap dealer” unless they trade over $8 billion per year in aggregate gross notional amount (AGNA). This $8 billion threshold was meant to be a temporary phase-in period, with the threshold ultimately due to be reduced to $3 billion.
XTX Markets’ annual report and financial statements for the year ended 31 December, 2017, show that its year-on-year profit remained largely flat at £60.98 million. In 2016 it reported a profit of £60.46 million.
In the financial documents, Alex Gerko, founder and CEO of XTX Markets, said that the profits generated last year met expectations, given the lack of volatility in the markets. He added that, rather than just profit, the key performance indicators for the company are the net trading revenues and the profit before tax.
“Revenues have grown 17%, driven by the company’s expansion into new markets and products and optimisation of existing strategies. The company’s trading strategies seek to take advantage of pricing movements in global securities that would be accentuated in periods of higher volatility in the underlying markets and securities in which the company opts to trade.
Jeremy Smart, head of distribution at XTX Markets, is critical of arguments that pre-hedging in the last look window enables FX market markets to keep quoting prices, even in difficult market conditions.
“The reality is that’s a nonsense. The basis on which a price is being made should be clear between a liquidity provider and the consumer. Now it’s not enough for me as an LP to turn around and say sometimes I’m a principle and sometimes I’m agent.
“If you’re agent, charge a fee and be clear that you’re passing on the exact fill that you got in the market to the customer, but do that before the transaction, not selectively transaction by transaction. So there needs to be much more clarity around that,” he says.
Trading firm XTX Markets’’ Singapore entity is building a new FX pricing and trading engine which will go live in Equinix’s Singapore SG1 data centre in June 2018.
XTX says it believes that the SG1 build-out will enhance the e-FX trading experience for XTX’s counterparties in the region and in turn, help increase participation rates and volumes for e-FX activity conducted within Singapore to benefit the regional FX market ecosystem.
“Under the Financial Services industry transformation map (ITM) introduced in October 2017, MAS aims to enhance the e-FX trading infrastructure to improve market transparency and facilitate price discovery of FX trading in the Asian time zone,” says Alan Yeo, executive director, Monetary Authority of Singapore (MAS).
Confirmation, to me at least, that we need to talk about market participants in more nuanced terms comes in the form of recent news and that perennial source of good gossip – the rumour mill.
I have banged on enough about the need to get away from the “bank/non-bank” divide because quite frankly it doesn’t exist anymore. I have also argued before about re-thinking how we bucket providers in this business and I strongly believe that the greater transparency that will come with better explanations of risk management policies will drive such a change.
Citadel Securities and XTX Markets have signed up as Cobalt launch participants.
Cobalt’s FX solution is set to launch later this year. There are currently 22 beta participants on Cobalt’s peer-to-peer network including Citi, which became a Cobalt investor in 2016, and Cobalt’s technology partners, including Setl, First Derivatives and Tradepoint.
Cobalt has also announced the expansion of its core team and the opening of a New York office.
Devika Darbari joins Cobalt as COO from JDX Consulting, where she was a board member and CEO Americas. She will also head up operations in the US.
Eric Swanson has been named as CEO of XTX Markets (Americas), effective June 1.
Swanson, who will be based in New York in this new position, comes from a securities market background, having most recently worked as the corporate secretary of Bats Global Markets since 2008.
Prior to Bats, Swanson served for more than a decade in a variety of roles at the Securities and Exchange Commission (SEC), including as assistant director with responsibility for oversight of exchange and broker trading systems.