Articles tagged by Forex Network Chicago
A number of geopolitical events – Brexit
and the US presidential elections to name but a few – have led to ongoing currency volatility. What
has the FX market learned about how the modern market functions in times of
high volatility and ...
Along with “Blockchain” the most ubiquitous phrase in financial markets this year has been “FinTech”, which of course encompasses blockchain technology.
Venture capital (VC) money continues to pour into the space, innovation labs and accelerator programmes are sprouting up in banks across the globe and many established technology vendors within the financial services industry appear keen to adopt the FinTech label.
But is the FinTech that we’re seeing come to market now really anything new? Or is it just the continuation of an old trend that’s been given a more exciting and investor-friendly label?
When discussing the future of the FX industry finding consensus amongst market participants about what the market will look like and how it will function can be challenging.
Yet one thing that appears to be broadly agreed upon is that the use of algorithms for executing trades is likely to continue growing in the coming years, as technology continues to evolve and firms look for new ways to minimise their market impact when trading.
Indeed, the use of algos is often prescribed as the answer to a market where it is becoming harder to execute in size and buy side firms are increasingly concerned about this issue of market impact.
The now infamous “SNB Day” forced a number of FX market participants to re-assess some of their long-held assumptions and business practices.
As liquidity evaporated fresh concerns were raised about the lack of risk taking experience and appetite amongst some sell side institutions and the impact of technology on liquidity in stressed market conditions.
As some firms reportedly attempted to re-paper certain trades it also added fuel to the ongoing debate about whether or not the practice of last look still has a place in the modern FX market. This is debate that has continued to rage on, notably at a very lively debate at Profit & Loss’ Forex Network New York conference in May.
With less than one week to go before the industry’s premier FX conference, Forex Network Chicago, Profit & Loss has recorded a special “Chicago Edition” of its podcast “In the FICC of It”.
The panel sessions will study all aspects of the current market structure with special focus on those areas most open to debate, this includes volatility levels, liquidity provision, the ubiquitous last look, and also the impact of the FinTech sector on the industry.
To preview the conference, P&L’s managing editor Colin Lambert and deputy editor Galen Stops, have been discussing what they see as the key issues facing the industry, as well as how they expect the panel sessions to go.
To access the preview, please click here, or go to the Media tab on the Profit & Loss website.
With the latest Bank for International Settlements (BIS) survey showing the first contraction in the size of the FX market since 1998, some market participants have commented that this is further evidence that the banks – long the principal source of liquidity – have stepped back significantly from the market.
This has left a clear opening for alternative liquidity providers, some of whom have been very public about their ambitions in the FX market. Some of these alternative liquidity providers have been quick to emphasise the fact that they do hold positions and take risk in the market, as opposed to just recycling liquidity or arbitraging between different areas of the market.
“I don’t believe in the idea of liquidity provision,” says one market source, adding: “Liquidity is a service, it’s not just provided, and all services have a price tag.”
There has been a broad re-pricing in a number of services provided to FX market participants over the past few years, and this is true of liquidity services as well. Of course, the big shift appears to be that banks are moving from a principal business model, where revenue is generated from spreads, to an agency one, where revenue is generated by charging a fee.
In many ways alpha seeking firms trading FX have endured something of a perfect storm of return reducing conditions over the past few years.
Interest rate differentials are still largely non-existent as central banks persist with low interest rate policies. Many banks have pulled back from both principal risk taking and credit provision in FX, making life harder for their buy side counterparts.
Regulations continue to take their toll on both buy and sell side firms, introducing new cost pressures and causing budgets to be increasingly diverted towards compliance functions.
Profit & Loss introduced a new format at Forex Network Chicago, which took place September 28-29. The second day was dedicated to the Profit & Loss Challenge, during which conference participants broke into working groups under five key topics: Geopolitics, Regulatory, Liquidity, Execution and Technology.
Raising the curtain on the day’s discussions during a new format on Day 2 at Forex Network Chicago, managing editor Colin Lambert kicked off with a series of questions to get the conversations going with topic speakers.
The Debriefing session brought together each of the five speakers after convening with their table heads to get feedback from each of the respective working groups, the results of which were presented in a panel discussion about the findings.
In the final act of Forex Network Chicago, The Debriefing session featured the five topic speakers providing an overview of the working group sessions that took place around each of the five topic working groups.
The main speakers and the table heads they worked with included: Geopolitics: Mario Manna, CEO, Nightberg, with support from table heads George Dowd, president, G. Dowd & Co; and Bob Savage, CEO, CCTrack.com.
More than 500 are already registered for Profit & Loss Forex Network Chicago, the biggest two-day FX conference in the industry. It's happening next week, so make your plans now to head to Chicago for the premier international FX event of the year.
Both days in Chicago are jam-packed with top experts from around the globe, ready to share with you their knowledge and insights.
Day 1 features Think-Tank sessions where you dive in and get involved in solving a critical FX issue of your choice. Then on Day 2, the speakers link the findings from these sessions in their discussions.
There has been a renewed focus on Transaction Cost Analysis (TCA) in recent years as buy side firms are becoming more savvy about how their execute their FX transactions and regulations such as Mifid II impose new best execution requirements.
But do market participants really know how to conduct effective TCA or is it just becoming a box ticking exercise designed to placate compliance staff, regulators and investors?
Banks are always quick to vouch for the accuracy and utility of their TCA reports, but can they be trusted to provide clients with an honest assessment of their own performance as a liquidity provider?
In this week’s In the FICC of It podcast, Galen Stops breaks ranks to say he found one of Colin Lambert’s columns interesting, while the latter makes an appeal for expert knowledge on risk-free rates – if only so he doesn't have to blag another podcast feature.
They also discuss the latest unfair dismissal outcome in the UK in which yet another FX dealer was found to have been wrongly sacked, as well as the potential implications for the fintech industry from a legal case in the US. In a busy podcast they also dispel some myths about AI – while at the same time making a big statement (is there any other kind?) on what will make AI trading successful; and they pick out their early selections for must-not-miss sessions from Forex Network Chicago in September.
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.
The FX Global Code is now over one year old and is generally seen to have been a success in establishing a blueprint for conduct in the markets. The number of firms adopting has been steadily growing but at such an uneven pace that some are wondering exactly how successful it will be? Next week’s Forex Network Chicago conference will kick off with an armchair debate and a panel session looking at the impact of the Code from two perspectives.
The paradox of data is, as observed by panellists at Forex Network Chicago, while the data itself is becoming cheaper and more easily accessible than ever before, the resources being allocated to analysing it are increasing, bringing with it increased costs.
“The core fundamental cost of collecting data and storing and processing it is cheaper than ever,” observed John Ashworth, CEO of Caplin. “The premium is going to be on the labour force that will be doing the work on the data.”