December 2010 / January 2011

Keeping control of FX

5 January 2011
The advent of electronic trading has revolutionised the equities market resulting in increased trading volumes and lower latency. While the adoption of electronic trading in the FX market is a far more recent phenomenon than in equities, it has already set in motion significant changes in FX trading with the market becoming more sophisticated, says Xavier Bellouard, co-founder at Quartet FS. In recent years, the FX market has evolved from a consolidated environment made up of a handful of big banking players owning the lion’s share of the market (75%) to an asset class where the adoption of electronic trading has led to a highly fragmented and competitive landscape, with new entrants including CMC Markets, SaxoBank and ForexCash. However, whilst comparisons can of course be made between the equities and FX adoption of electronic trading, these two asset classes pose very different environments - especially in regards to risk management.

Achieving service-led nirvana

5 January 2011
With the rise of the profit-centre corporate treasury model, access to global-standard transaction banking solutions that provide international reach, enhanced transparency and processing efficiency has become a prerequisite of the post-crisis era. The challenge though, explains Dominic Broom, Managing Director, Market Development, EMEA, BNY Mellon Treasury Services, is for small and mid-tier banks operating on a regional basis to be able to provide these services in a cost-effective, competitive and compliant manner. As Eleanor Hill, FX-MM Editor discovers, this calls for a dynamic approach to global and local bank partnerships: the collaborative ecosystem.

Anyone for dominoes?

5 January 2011
With the end of 2010 just around the corner, there are some weighty questions hanging over the currencies markets. Will the euro unravel? Where will policy lead us in 2011? Will Bernanke ever get his credibility back? As Eleanor Hill discovers, sometimes ignorance is bliss, but sometimes it’s pure agony. First Greece and now Ireland. Bets for the next domino to fall sit firmly with Portugal, followed by Spain and Italy, as speculation about the spread of the Eurozone crisis grows (again). When the Irish bailout package was first agreed with the IMF and other European stakeholders, there was a brief pause for thought in the markets. Somewhat inevitably thought led to doubt and as, at the time of writing, we await the Irish parliamentary vote on the bailout package, it seems as though things are going from bad to worse, with the very existence of the single currency being called into question.

The future of FX: one size can fit all

5 January 2011
Striving for sophistication and transparency, connecting traders to the ECN market, the death of the traditional broker/trader model – Frances Maguire takes a look at trends in FX from the point of view of two major players: Citi and Fair Trading Technology. The growth of retail foreign exchange trading has been both steady and remarkable. According to a report last year by Greenwich Associates, FX trading volumes increased during the credit crunch in 2009 among only one type of financial institution: retail aggregators.

Citi scales up Velocity

5 January 2011
Launched just over two years ago, CitiFX Velocity is already leading the way with a broader range of instruments and sophisticated services for the professional trader. Frances Maguire talks to Susan Gammage and Justin Geaney from Citi’s FX eCommerce team. The growing interest in trading FX amongst professional traders is leading to greater competition amongst banks and more sophisticated platforms and trading tools, blurring the lines between retail and institutional trading.

The future is clear

5 January 2011
The official launch of the T3 Execution Bridge by Fair Trading Technology (FTT) last year brought an unprecedented level of transparency to FX trading. Frances Maguire talks to FTT about the need for greater transparency in FX as we move towards a new regulatory era. Fair Trading Technology’s T3 Execution Bridge provides a transparent connection to the ECN market. Through provision of a transparent order reporting system it enables users to verify all their transactions with their broker and know that they are clear from any manipulation or indeed any other unethical behaviour.

Taking risk by the horns

5 January 2011
Using a photograph of the Wall Street “Charging Bull’ sculpture on the cover of a book about the collapse of Lehman Brothers proved to be rather a risk for Random House publishers. Well, when the sculptor decided to sue over the image’s unauthorised use that is. Since the credit crisis hit, the profile of corporate risk management has changed irrevocably – no more so than in the treasury department. Today, treasurers have more responsibilities than perhaps ever before and yet fewer resources to address them with. So how can risks be prioritised and what should be at the top of the list?

Turkey: bridging the gap

5 January 2011
Situated at the crossroads between Asia and Europe, the Republic of Turkey is an ancient trade hub that holds both cultural and financial appeal. With a mix of industry-led commerce and traditional agriculture, Turkey’s economy is diverse and dynamic, attracting increased foreign direct investment in recent years. Boasting a skilled labour force and a competitive marketplace, Turkey is the world’s 17th largest economy (by nominal GDP) and has been the subject of much financial media attention in 2010, as FX-MM discovers.

Aykut Demiray, Deputy Chief Executive Officer, Isbank speaks to FX-MM about doing business in Turkey.

5 January 2011
What opportunities does Turkey have ahead of it to become a leading economy? Policies towards eliminating macroeconomic imbalances, a rapid growth process led by the private sector, decreasing public debt to GDP ratio, falling inflation, increasing foreign trade, young, dynamic and qualified labour force and strong domestic market have all attracted the attention of foreign investors in recent years. In this process, there was a special focus on financial sector, which became more important. Turkey has significant potential in skilled labour and revenue generation.

‘New deal for the euro’ exposes the currency as synthetic

5 January 2011
The ‘alteration to the euro rules’ brokered by Chancellor Merkel, aims to ensure that holders of sovereign debt bonds will experience a partial loss of principal if there is bailout of a euro nation. Merkel wants to reassure voters Germany won’t underwrite the obligations of the rest of Europe; this has become a critical issue around the loans for Ireland, in that although Germany is directly and indirectly involved in providing the new money, it has not agreed to pay-out Ireland’s maturing bonds if Ireland cannot. That said, the new money is being provided to lend new money if Ireland’s bonds mature and it cannot issue new ones: spot the difference. But there were no rules to be altered: Chancellor Merkel has merely clarified the existing situation – and the fault lines at the heart of the euro as a currency.