I don’t think there is anyone out there who
doesn’t think the FX market performed well under the stress of the surprise
outcome from the UK referendum last week, but I suspect the real test is only
Following the results of the UK referendum decision to leave the European Union last week the common consensus amongst FX market participants has been that the biggest surprise – apart from the result itself – was how well the FX market handled ...
Three years after the Monetary Authority of
Singapore (MAS) sanctioned
20 banks and 133 traders over breaches in good conduct regarding the local
interest rate fixing (Sibor), two US investment funds filed a class action lawsuit
in New York on Friday (July 1) ...
One line in the
midweek column tweaked some interest among the readership, my mention of the
“juniorisation” of the sales role in the banking world.
I must confess I
hadn’t thought about it too much, it has very much ...
This really is a tricky time for the
foreign exchange industry. The chat room scandal has truly opened a can of
worms and it seems there is rarely a month that goes past without yet another
case of unfair dismissal ...
The International Swaps and Derivatives Association (ISDA) has published a whitepaper calling for greater standardisation and automation of derivatives market infrastructures.
The new paper, The Future of Derivatives Processing and Market Infrastructure, highlights a number of challenges with existing structures and processes, and recommends several steps the derivatives industry can take to create efficiencies – in particular, by embracing opportunities for further standardisation.
"The derivatives industry has become reliant on legacy infrastructures and processes that have been layered on top of each other over time. That might be the result of historical acquisitions, where the respective systems haven't been fully integrated. More recently, the sheer pace of regulatory change has meant firms have been under pressure to tackle the next pressing deadline. The result is a derivatives infrastructure that is duplicative and based on incompatible operating standards, and this isn't sustainable," says Scott O'Malia, CEO of ISDA.
That we are still debating the positive or negative impact of non-bank market makers on the FX market doesn’t surprise me – what does is the simplistic level of debate over what I consider to be a fairly complex issue.
Yes the big prime brokers could shut these firms down with a hefty rise in prime brokerage fees or a withdrawal of credit totally - that would send most of them back to where they first emerged – the cleared world with its very limited spot foreign exchange market opportunities.
A new study from Greenwich Associates suggests that FX dealers are narrowing their focus in terms of which products and clients they will cover.
For the study, Greenwich says that it conducted interviews with 2,393 corporate and financial users of foreign exchange around the world about market trends and their relationships with their dealers.
The results showed that, for the second consecutive year, significant market share was redistributed among the dealers in the top ranks of the FX market in 2016, with some leading dealers adding as much as two full percentage points in market share and others ceding similar amounts.
The top five FX dealers are losing market share, according to a new report from Greenwich Associates.
Although the world’s five biggest FX dealers still capture a massive 44% of global market share in aggregate, according to the research, that proportion is down from 48% last year and from 53% in 2013.
The report identifies several trends that are driving these changes. It says that while top-tier dealers have been narrowing the scope of their product, regional and client coverage, FX investors continue to increase their trading via multi-dealer platforms, which create a more level playing field for liquidity providers.
So we’ve just published our Q3 edition of Profit & Loss magazine, which includes our prime services special report, and I wanted to share some thoughts about one segment of it.
When I first started the report I was very negative on the prospects for FX prime brokers, over the eighteen months or so I’d heard so many complaints about credit constraints, about offboarding – I don’t think that was even a phrase that I’d heard prior to SNB – and the general retrenchment of FXPBs.
Now obviously SNB was a catalyst for a lot of these issues, but really it just exacerbated a trend that already existed and this was caused by the introduction of new regulations that made it more expensive for banks to offer FXPB services to a lot of clients.
If one phrase could describe a year in financial markets, 2017 would definitely be the year of MiFID II – the regulation dominated a lot of headlines, thinking and, importantly, budgets throughout the year.
In the single dealer platform space, this meant that if other work was done, it probably happened early in the year while people were still somewhat complacent about another delay to the regulation. Once we entered the second half of the year, the message from all banks was pretty much the same – technology budgets and resources were sucked up by MiFID II on a huge scale.
P&L Report Card
Although there is still definitely a push towards homogenising asset classes on the part of some regulators, generally speaking the last few years have seen practitioners realise that FX in particular, cannot fit into any of the boxes they currently have labelled “equities”.
Some banks went down this route and tried to lever FICC into the equities model and generally speaking it didn't go well – as shown by those institutions retreating back to their siloed models.
This does not mean, however, that a strong multi-asset class offering cannot be built – it most certainly can, but it does mean there are inevitable challenges associated with doing so. First and probably foremost, which business runs the project? Even within FICC there are different drivers and requirements, throw in equities and the number multiplies by several magnitudes.
Benchmark fixes have been immersed in controversy for the past five years, but anecdotal evidence sees no shift in asset manager attitudes to them. Colin Lambert asks, will these firms ever desert the Fix?
If there has been one lightning rod for controversy in what has been a pretty turbulent period for the foreign exchange industry it has been benchmark fixes. Banks have been fined, traders and managers have been dismissed, and some are facing legal sanctions, including jail, thanks to various activities all of which were centred on the WM and European Central Bank fixes.
Forex Network Chicago features two panels looking at the most important subject of liquidity provision in FX markets through two very different prisms. The first looks at the issue from the perspective of FX banks; how are they prioritising where they send liquidity and how are data capabilities changing how clients are evaluated? It will also look at the role of buy side as genuine liquidity providers and look at the impact on market conditions if what some consider to be a withdrawal from the market by the banks takes place.