Central Banks: Both Killers and Causes of FX Volatility

Bob Savage, CEO of CCTrack Solutions, talks to Profit & Loss deputy editor, Galen Stops, about why geopolitical unrest this year hasn’t translated into more FX volatility. This year has been marked by a high degree of geopolitical unrest and uncertainty, with Britain voting to leave the European Union, Italian banks struggling ahead of an important referendum later this year, questions being raised about the future of Europe and a divisive US presidential election. Meanwhile the war in Syria continues, ISIS has not been defeated, Russia is considered to be actively attempting to expand its sphere of influence and there is the suggestion that some long-time US allies in Asia – such as the Philippines – could drift closer in their relations to China in the coming years.
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Why FX Needs a Unique Regulatory Approach

Matt Kulkin, a partner at Steptoe and Johnson, explains to Profit & Loss deputy editor, Galen Stops, why a “copy and paste” approach to regulation won’t work for FX. FX is often referred to as an “unregulated” or “self-regulated” market, and yet in recent years bans have been fined billions of dollars by regulators for alleged infractions in this market, while criminal charges are being brought against FX traders in the US courts. Kulkin explains this disparity by pointing out that the entities involved this market are regulated and therefore subject to oversight by a various national authorities. However, unlike the securities markets or the OTC derivatives markets, there aren’t concrete regulations regarding the market place, he says.
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Room for Numerous Prime Services Models in FX

Louisa Kwok, head of prime of prime sales and products at ADS Securities London, explains to Profit & Loss deputy editor, Galen Stops, why there’s room for numerous different prime services models in the FX market. With many of the traditional FX prime brokers (PBs) being increasingly selective about who they will offer their services to, this has created a gap in the market that many firms appear eager to fill. Subsequently, numerous prime services offerings are being touted to market participants under the banner of prime-of-prime.
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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.”
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How Technology is Shaping Regional FX Banks

Svante Hedin, global head of electronic markets at SEB Merchant Bank, explains to Galen Stops, deputy editor of Profit & Loss, how technology is changing the role of the regional banks. Hedin says that the evolution of the regional or super-regional banks is being driven by a number of factors, one of which is technology. “It’s an enabler for some of the banks that at some point were dominant players in their particular currencies and then as the years have gone past they have perhaps under-invested and not quite kept up with the overall progress of technology and effectively get swallowed up by some of the larger guys,” he says.
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