Articles tagged by NDFs
Sofiane Saidi is set to leave LCH Clearnet, where he currently works in NDF and FX options product development, according to market sources.
Profit & Loss understands that although no official date has been set for Saidi’s departure from the ...
Bats Global Markets (Bats) has announced plans to acquire Javelin, a Swap Execution Facility (SEF) that is registered with the US Commodity Futures Trading Commission (CFTC).According to Bats, the deal is intended to accelerate it plans to offer trading ...
Thursday marks an important day for financial markets with a fragmented regulatory regime about to come into force, and NDF and FX options markets are right in the firing line. Will the already fragile liquidity picture in these markets worsen?
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.
Bats Global Markets completed its acquisition of Javelin SEF, a swap execution facility (SEF).
The deal was announced on August 11, 2016 and received approval from the Commodity Futures Trading Commission (CFTC) on October 23, 2016.
Javelin has been integrated with Bats Hotspot, the institutional FX trading platform, in order to enable trading in non-deliverable forwards (NDFs). Hotspot already offers trading in outright deliverable forward contracts. Dodd Frank Act provisions mandate that certain market participants have to trade NDFs on SEFs.
ForexClear, LCH Clearnet’s centrally cleared FX operation, reported record volumes in October, driven in large part by activity in Latin American currencies.
The CCP cleared $500 billion in notional in October, with over 20,000 trades cleared in just one week and almost 80,000 cleared during the entire month.
By contrast, in July less than 20,000 contracts with a notion value of less than $125 billion were cleared at the CCP.
ForexClear says that while an increase in Asia currency NDF volumes helped drive this growth, Latin American currencies saw and even greater increase in activity, with $64 billion of BRL fixing at the end of the month.
The Malaysian Ringgit is approaching its lowest trading level against the US dollar since the Asian crisis in 1998 when the country was prompted to introduce capital controls.
In an attempt to stem the outflow of MYR, the country’s central bank, Bank Negara, last week issued a warning regarding offshore NDF trading – a move widely seen as a reintroduction of capital controls – by sending letters to compliance heads at onshore and offshore banks demanding they commit to ceasing offshore trade of MYR NDFs.
The Australian Competition and Consumer Commission (ACCC) has commenced legal proceedings on a consent basis against ANZ and Macquarie Bank in relation to alleged attempts to engage in cartel conduct in FX markets.
The ACCC says that following cooperation by ANZ and Macquarie, the parties have agreed that a Macquarie trader and multiple traders within ANZ engaged in a private chatroom to discuss daily submissions to be made to the Association of Banks in Singapore (ABS) in relation to the benchmark rate for the Malaysian ringgit fixing rate.
Bloomberg has launched executable streaming non-deliverable forwards (NDFs) on FXGO, its global foreign exchange trading platform.
Standard Chartered Bank (StanChart) will be the first liquidity provider to participate. Bloomberg says that the new offering will allow the bank to contribute executable pricing across a wide range of Asian and Latin American non-deliverable currencies to meet the needs of its corporate and institutional clients.
The solution integrates Bloomberg's FX execution and straight-through processing (STP) tools with StanChart’s liquidity. It’s designed to offer end-to-end workflow for NDF trading to the bank’s clients that wish to execute via the Bloomberg Terminal.
The US Commodity Futures Trading Commission (CFTC) has fined Société Générale $450,000 for failures in the reporting of certain FX transactions.
The CFTC says that the French bank failed to properly report certain NDF transactions to a swap data repository (SDR), and failed to report to an SDR a large number of FX swap, FX forward, and NDF transactions in a timely manner, in violation of the Commodity Exchange Act (CEA) and CFTC Regulations.
herefore, the CFTC announced an order today requiring Société Générale to pay a $450,000 civil monetary penalty and to cease and desist from committing further violations of the CEA and CFTC Regulations.
IHS Markit says that in 2017 it has processed a monthly average of 54,000 NDF contracts via Markitserv, a 920% increase compared to the same period last year.
“NDF clearing has seen strong interest as a response to the uncleared margin rules and other market factors,” says William Black, US head of OTC derivatives clearing at Credit Suisse. “We are proud to bring a scalable solution to this space and look forward to partnering with non-member clients as the market continues to develop.”
Pragma Securities has expanded its algorithmic trading platform, Pragma360, to include NDF products.
While the latest Bank for International Settlements (BIS) survey in 2016 showed that spot FX trading was down 19% compared to three years previous, it also showed that the NDF market grew by 5.3% over the same time period.
The growth of the NDF market, as well as the fact that these products increasingly trade electronically, is what prompted Pragma to start offering algorithmic tools for trading them, Curtis Pfeiffer, chief business officer at Pragma, tells Profit & Loss.
Thomson Reuters (TR) is the latest FX platform to post strong September trading volumes, with figures released today showing that the average daily volume (ADV) of FX trading across all its platforms was $411 billion.
This represents a 12% month-on-month (MoM) and a 12.6% year-on-year (YoY) increase in volumes.
This total reflects trading volumes on Thomson Reuters Matching and FXall in all transaction types, including spot, forwards, swaps, options and non-deliverable forwards (NDFs).
The volumes data on TR’s website only stretches back to January 2013, but this represents the highest overall ADV across all of its platforms since then.
Nex Optimisation is now providing central clearing connectivity for its FX risk mitigation service in non-deliverable forwards (NDFs).
The clearing connectivity capability enables dealers to flag trades that are part of a risk mitigation cycle for automatic submission to a central counterparty clearing house (CCP).
This means that clients of Nex’s Reset FX risk mitigation service can now have their trades be submitted directly for clearing rather than having to be re-submitted for secondary matching prior to communication to a CCP.
CME group has announced that seven market participants have agreed that they intend to clear OTC FX non-deliverable forwards (NDFs) by the end of Q1 2018.
“As more clients and liquidity providers are affected by uncleared margin rules, additional market participants clearing NDFs will provide greater access to the capital efficiencies of OTC FX clearing for clients around the world. Emerging market currencies provide a unique opportunity to cross-margin NDFs with non-deliverable IRS cleared at CME, offering potential initial margin savings of up to 51%,” says CME in a statement issued
The seven market particpants involved are: BBVA, Citi, Itau Unibanco, NatWest Markets, Santander, Standard Chartered and XTX Markets.
LCH says it has cleared a total of $745 million of G10 FX NDF currency pairs less than one month after the products went live on its ForexClear service.
The new NDF currency pairs reflect the five most actively traded G10 currencies: Australian dollar, euro, Japanese yen, pound sterling and Swiss franc, against the US dollar. LCH says that expanding ForexClear’s coverage to incorporate these pairs increases opportunities for capital optimisation by increasing the number of products eligible for clearing at LCH.
CBOE Global Markets (CBOE) has announced the launch of NDF trading on its Swap Execution Facility (Sef), CBOE SEF.
CBOE Sef will offer a fully anonymous central limit order book with firm all-to-all trading available to all market participants, configurable firm and non-firm streaming quotes for tailored liquidity needs and curated liquidity pools to help meet participants’ execution criteria. The Sef will also offer pre-trade Net Open Position (NOP) credit checks and real-time risk management.
CBOE claims that there will be a diverse network of participants resting passive liquidity and a wide distribution network for market makers on the platform.
Since launching its initial suite of FX products four years ago, SGX has reported consistent growth in this business segment. But can the exchange sustain the momentum going forward? Reporting from Asia, Galen Stops takes a look.
Back in November 2013, Singapore Exchange (SGX) went live with trading for six deliverable and non-deliverable currency pairs: AUD/USD, AUD/JPY, USD/SGD, INR/USD, KRW/USD and KRW/JPY. As Profit & Loss noted at the time, the aim was clearly to establish SGX as the major hub for Asian currency futures trading.
Fast forward four years and it appears that the exchange is well on its way to achieving this ambition, with the star performers in its FX suite being the INR/USD and USD/CNH contracts, the latter of which was launched in 2014.
Clearing house LCH has announced record volumes across multiple clearing services in 2017, with FX leading the way by registering the greatest pace of growth across established products.
The firm says its equities, fixed income, and OTC derivatives clearing services all surpassed previous years’ clearing activity, with growth driven by the roll-out of new products, effects of regulatory change and the onboarding of new customers across the world.
LCH’s FX derivatives clearing service, ForexClear, delivered very strong growth in 2017.
CME Group announces that three of the larger FCMs in the market – Citi, Credit Suisse and Morgan Stanley – have started to clear NDFs for their clients at CME.
This follows on from the announcement from the exchange in late 2017, that seven market participants had agreed to clear NDFs, including three of the top four emerging markets FX liquidity providers, according to the Euromoney survey.
CME claims in a release issued today that its strength in the interest rate swaps (IRS) markets in LatAm and APAC make it “the natural home for participants to clear FX NDFs”.
Galen Stops digs a little deeper into the results of the recent JP Morgan e-trading survey and finds some surprising statistics.
For those of you who missed it, there were some noteworthy nuggets of data contained within JP Morgan’s recent e-trends survey. But digging a little deeper beyond the headline figures reveals some even more interesting trends emerging in the FX market.
The first thing to point out is that the survey raises some curious questions about algo usage amongst clients. On the surface, it presents good news for algo providers – although only 8% of respondents said that they currently use algos for execution, 24% said that they plan to increase their usage of them in 2018.
The news that State Street has gone live as the 13th liquidity provider (LP) on FXSpotStream comes as the service has reported its highest ever month of average daily volumes (ADV).
“We closed the year on a strong note with the addition of State Street to the existing panel of global banks on our Service. State Street is now live globally and pricing to our clients out of our sites in New York, London and Tokyo,” says Alan Schwarz, CEO of FXSpotStream.
Speaking to Profit & Loss about the addition of State Street, Schwarz observes: “What’s interesting about them is that their e-FX franchise is at a different life cycle than some of our other liquidity providers and they have been focusing on improving their electronic pricing service.
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.
Cboe Global Markets has announced that its swap execution facility, Cboe SEF, has launched trading of USD/RUB and USD/PEN non-deliverable foreign exchange forward currency pairs.
The SEF, which launched NDF trading in December 2017, now supports trading in 12 pairs. Bryan Harkins, executive vice president and co-head, markets division, says, “As we continue to build this new market, we have received strong interest from firms across the globe, particularly buy-side firms, many of which have been interested in trading these newly-listed currency pairs.”
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.