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.
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FX Volatility Highlighting Under-Served Market Segment

A more volatile trading environment is exposing a segment of businesses that are currently being under-served by FX service providers, claims Moises Michan, a managing partner at Tanridge Capital. “I think that when you start looking into these higher volatility environments is when you start having treasurers and heads of family offices realising that they’re not FX experts, there’s a lot of mechanics a lot of input going into the FX market, and they do have exposures,” he says. Michan says that Tanridge capital is focusing its efforts on providing FX asset management services for small to medium sized institutions that don’t meet the client requirements of the big banks.
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C-View: “We Know Where the Bodies are Buried”

Speaking at Profit & Loss’ Forex Network London, Paul Chappell, CIO of buy side firm C-View, explained how liquidity trends are being negatively impacted by the Fix scandal. In a featured new segment introduced at Profit & Loss’ Forex Network London called BURSTS, Paul Chappell, CIO of buy side firm C-View, sought to explain liquidity trends in the FX market in the context of the recent scandals that have plagued the industry. In this TED Talks-styled presentation, Chappell sought to address why there are, in his opinion, only a few genuine market makers left in the FX market that everyone else prices off, and why currency managers have seen their returns significantly reduced.
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Flash Crashes: A Not So Modern Phenomenon

Following the sterling flash crash last year there has been much industry debate about what the increasingly regularity and severity of these events means for FX market participants and whether anything can be done to prevent or mitigate their impact in the future. According to Neil Crammond, risk manager for FX at Avem Capital, part of the reason why these flash events are occurring is simply that markets aren’t used to the levels of volatility that used to exist prior to the financial crisis and the implementation of quantitative easing by a number of central banks. “I think that the problem with the modern FX market is that pre-2008 if you came in every day and someone said to you that “we’re going to have a 300 tick move in the cable every day”, you’d trade according to that,” he says.
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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.”
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Would the Global Code Have Prevented FX Scandals?

One of the key questions surrounding FX Global Code of Conduct, of which the second part is due to be released on May 25, is whether it would have actually prevented the scandals that have dogged the FX industry in recent years. Brigid Taylor, global managing director of ACI, argues that it would have. “In financial markets people say: talk is cheap but my word is my bond. So if I say that I’m going to do something then I need to understand what that means, I need to understand how to apply that knowledge and then I need to do it,” says Taylor, adding that this knowledge ensures accountability.
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Correlation Challenges for FX Traders

Isaac Lieberman, CEO of Aston Capital Management, talks to Profit & Loss deputy editor, Galen Stops, why it’s hard to find uncorrelated markets to trade right now. “Volatility is very compressed right now because there’s a lot of central bank activity and markets are very highly correlated,” says Lieberman. He adds that the FX market needs a “theme” that will cause it to break away from other markets, but that in the meantime “we’re certainly waiting for volatility to return”. Lieberman says it’s become very hard to find uncorrelated markets, with equities, rates and FX all trading in unison and therefore dampening volatility. One reason for these correlations is the lack of interest differentials, but he also highlights central bank intervention as another factor that is causing this.
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FinTechs: Enablers, Not Disrupters

David Mercer, CEO of LMAX Exchange, talks to Galen Stops, deputy editor of Profit & Loss, about why FinTechs are enablers rather than disruptors of the FX market. The world “disruption” is often applied to FinTech firms, yet Mercer argues that in FX the role of these firms is not to disrupt but to enable the growth of the market. “We’re trying to enable the industry to operate more efficiently and more fairly. Other people put that disruption word around companies like LMAX Exchange but the FX market is the biggest asset class in the world, it doesn’t really need disrupting, it needs to grow and it needs to be enabled to allow it to grow.
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Building a Modern FX Platform

Rick Schonberg, global head of product for trading and clearing and the North American head of trading solutions at Currenex, talks to Galen Stops, deputy editor at Profit & Loss, about the launch of X2 trading platform. “In some ways it’s easier and in some ways it’s harder,” explains Schonberg, who describes the number of execution choices available to these traders as “mind numbing”. He says that many institutional clients, such as corporate treasurers, used to trade FX by doing what was effectively a telephone request for quotes (RFQ) to a handful of banks and then automating that into a GUI on a multi-bank platform
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Can Blockchain Help Alleviate the Credit Crunch in FX?

Franck Mikulecz, managing director of FXCH, talks to Galen Stops, deputy editor of Profit & Loss, about how blockchain technology can help mitigate some of the credit challenges facing the FX industry. With blockchain, or distributed ledger technology, still being so new to financial services, Mikulecz claims that banks are still trying to figure out the most effective way to deploy this technology. “I can see a lot of banks have an interest because they know that the market will evolve and the market will potentially be disrupted by the technology but they don’t really know how it’s going to happen and they don’t really know how to use it themselves.
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