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Articles tagged by SNB

FXCM Hits Back at CFTC Charges FXCM has issued a statement expressing severe disappointment at the charges leveled against the firm by the Commodity Futures Trading Commission (CFTC), stating that they are “unprecedented and unwarranted”.  The CFTC claims relate to when the Swiss National Bank (SNB) ...
US Court Dismisses Fraud Claims Against FXCM A US court has granted a motion to dismiss the legal complaints aimed at FXCM, and certain members of its senior staff, in which the plaintiff alleged that they were mislead about the risks associated with the firms’ agency business ...
Buy Side View: Risk Managing in Extreme Market Conditions Richard Preschern, CEO of Robosig and Co-Founder at FX Vision, talks to Profit & Loss deputy editor, Galen Stops, about the lessons he’s learnt from recent risk events. Speaking about the volatility following the Swiss National Banks’ decision to pull its peg to the euro, Preschern comments: “What you understand is that the execution that you get during these events is nothing to do with what you model because the market is simply not there. “So what you have to do in terms of risk management is look at your extreme points in terms of exposure because you just don’t know that you’re going to be able to get out, which is what causes a lot of wreckage in the market.”
The Reality Check Much has been made of the sharp drop in spot FX volumes in the recent BIS Turnover Survey, but, Colin Lambert asks, is what we are seeing merely a return to a longer term trend? A regular theme in Profit & Loss over the past two years has been, since the traumatic events of January 15, 2015 around the Swiss franc peg, the return to relationship trading at the expense of the all-to-all model. Analysis and data recently released by the Bank for International Settlements based upon its recent Triennial Central Bank Survey of FX Turnover appears to support the notion that the FX market is losing its infatuation with market share at all costs and is much more choosy about who it deals with.
The DNA of a Flash Crash A new paper uses trade repository data to forensically analyse the Swiss franc de-pegging and while Colin Lambert finds its conclusions are familiar, the paper offers other insights The story is familiar to anyone in the foreign exchange business – on January 15, 2015, the Swiss National Bank shocked the markets with the announcement it was abandoning its Swiss franc ceiling to the euro at 1.2000. Chaos ensued as EUR/CHF collapsed over 40% before recovering sharply, after which the industry was left to rake over the ashes of what was to many a debacle.
P&L Talks Series with Brandon Mulvihill Brandon Mulvihill, managing director, head of FXCM Pro, explains that there is still not enough clarity about the different prime-of-prime services being offered in the FX market, and warns that it is a mistake to believe that these firms are currently ready to fill the gap left by the tier one prime brokers. Profit & Loss: Since “SNB Day” there have been a lot of firms touting prime-of-prime (PoP) services to the FX market. Many of them actually provide very different services. Two years on from SNB, do you feel like these differences are better understood by market participants?
Are Markets Headed for a Nasty Shock? When assessing which large tail risk events are likely to take place in 2017, speakers at Profit & Loss’ Forex Network London emphasised that there are other risk factors being overlooked that might have a greater impact on financial markets. “Like last year, the tail risks this year are quite high compared to normal,” said Colin Harte, strategist and senior portfolio manger at BNP Paribas Investment Partners. “There are some quite material risks that – if they come to pass – could have a significant impact on markets.” He noted, however, that many of the expected tail risk events from 2016 were less dramatic than expected in the end: sterling took an obvious hit after the Brexit result, but soon became range-bound again, while the Trump election victory actually led to a rally in the equity markets.
Credit Not Only Factor Changing Prime Services As access to credit has becoming increasingly constrained in the FX market, Noel Singh head of e-FX business development at Sucden Financial, explains that this is only factor at play in the evolving prime services space. Questioned on the new credit reality in FX markets, Singh responded: “I think credit is only one aspect of the story and I think that post-SNB, when the top tier prime brokers lost money because their clients couldn’t make good the losses, that started it, but I think it’s now the concept of how much is the wallet worth to the prime broker.”
FastMatch: Last Look Gone in Two Years Although Dmitri Galinov, CEO of FastMatch, defends the controversial practice of last look in FX, he also claims that it will be eliminated within the next two years. Explaining why last look has become such a hotly debated topic within the FX industry, Galinov explains that it is “a valuable tool” that enables liquidity providers to quote tighter prices to their customers. The problem, as he puts it, is that “consumers want tighter prices but they don’t want last look”. For now, however, the two appear to be mutually exclusive, which is why this is a difficult issue for the industry to solve.
FXPB: Which Way is the Pendulum Swinging? Over the past few years, some FX prime brokers have gone from aggressively competing for market share to off-boarding clients and increasing their fees. What happened to make the pendulum swing so dramatically, and is it due for another reversal? Galen Stops reports. Relatively speaking, it wasn’t all that long ago that banks were aggressively trying to build out their FX prime brokerage (FXPB) businesses and competition was fierce. This precipitated a race to the bottom in terms of fees by some FXPBs. Numerous market sources claim that Morgan Stanley was at the forefront of this race, although they note that a number of major FXPB players were not far behind.
And Finally... The notoriety of me busting a Saturday Night Fever move on stage at Profit & Loss Stockholm last week is growing, therefore I will subtly(!) shift the direction of the conversation – but retain its musicality – by noting that I don't remember “Ebeneezer Goode” by The Shamen being a number one single in the UK. Equally I don’t think I have ever listened to “Tubular Bells II” by Mike Oldfield. I was, however, very busy the week both hit the top of the charts.
In the FICC of it - Surprise Optimism Regarding FXPB 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.
Prime-of-Prime: A Risky Business? Galen Stops takes a look at some of the potential risk concerns associated with the prime-of-prime model in FX. I n a recent survey conducted by Profit & Loss 57.25% of respondents said that they think the trend towards more firms using prime-of-primes (PoPs) rather than traditional FX prime brokers (FXPBs) could increase the impact of a shock event. This is in contrast to 27.48% who said that it won’t and 15.27% who think the impact of a shock event would be unaffected by this change. The logic underpinning this concern is based on the fact that risk is increasingly being pushed towards less well-capitalised institutions.