February 2011

Industry weighs up impact of regulation

4 February 2011
At last month’s Foreign Exchange event in Brussels, hosted by the Association for Financial Markets in Europe (AFME), senior industry figures shared concerns that proposed regulatory changes in the US and Europe could have serious unintended consequences for their businesses. James Kemp, Managing Director of AFME’s Global FX Division reflects on the event and explains why the FX market seeks exemption. The largest and most liquid over-the-counter (OTC) market in the world, which plays a fundamental role in the global economy and underpins the entire financial system, is under threat of regulation in the US and in Europe.

Setting the Standard

4 February 2011
A company that is not afraid to break the mould, Fair Trading Technology has created the world’s first transparent MT4 to ECN trading solution and is poised to revolutionise the foreign exchange trading industry in 2011. Eleanor Hill, Editor, FX-MM speaks to Tim Haman, CEO, Fair Trading Technology (FTT) about transparency, innovation, strategy, regulation and more. It is three o’clock on a Friday afternoon and yet Tim Haman is by no means winding down for the weekend. From the moment we start our interview, his genuine interest in making the FX markets more open, honest and fair is striking. I realise almost instantly that the company’s name has certainly been chosen for a reason – and this is not one related to marketing strategies. Honesty, security, technology and innovation: these are the four cornerstones of FTT’s transparency model, which also lie at the heart of the six-strong team of entrepreneurs.

A rollercoaster ride

4 February 2011
January’s currency markets were no place for those of a weak disposition. With talk of tighter monetary policy coming from the Asian central banks and rate hikes under discussion in Euroland and in the UK, February looks set to be a lot of fun. Hold on to your hat! BY NO MEANS A SLOW START As the currency commentators returned from their protracted end of year holidays, it was a full throttle start to 2011 with the European debt crisis still centre stage. As such, Estonia, which became the 17th member of the single currency group on 1st January, received a somewhat downbeat welcome. There was less talk about the euro newcomer than there was speculation surrounding the future of the single currency itself.

E-fx – popular myths dispelled

4 February 2011
The rise of electronic trading in foreign exchange has not come without its challenges. Frances Maguire looks at whether the growth is sustainable, where future growth will come from, and whether FX can really be considered different. In 2010, the foreign exchange market continued to grow, both in size and value. The average daily volumes settled in CLS were up 33% on 2009 and average daily values were up 22%. However, contrary to popular belief that the year-on-year growth of the FX market will continue unabated, the impressive growth rate is finally showing signs of slowing for the first time since records began.

Portware FX: shaking up institutional trading

4 February 2011
In today’s market, it is no secret that asset managers are focusing on FX execution quality to a greater extent than ever before. Buy-side firms who traditionally relied on custodians to manage their FX risk – and suffered egregious markups as a result – are becoming increasingly frustrated with the status quo, as evidenced by CalPERS high profile lawsuit versus State Street in late 2009. Yet it is not just antiquated custody agreements that are driving the buy-side to revaluate their trading processes. Even institutions who manage their own FX risk realise that their legacy toolsets may not be adequate in today’s complex marketplace. As a result, traditional asset managers have emerged as some of the leading adopters of advanced FX trading technology.

Getting physical

4 February 2011
Global commodity markets are undergoing a period of unprecedented change, with some bumper times in recent years fuelled by buoyant demand for raw materials from a rapidly industrialising China. This sustained rise in prices is sparking the interest of bullish investors seeking to sidestep the diminishing margins and falling returns of some other asset classes. But the unique challenges of trading physical commodities place new demands on existing systems and expertise. Stuart Cook and Richard Philcox of Baringa Partners identify the difficulties and explore the possible approaches.

eBAM grows up

4 February 2011
While the benefits of electronic bank account management (eBAM) are clear-cut and numerous, there are still only a handful of people in the industry who are really making a noise about it. So where does eBAM need to step up the game? How can adoption be increased and is replacing paper with electronic messages really the answer to improved account opening, closing and maintenance? With corporates largely following the trend towards a centralised treasury department, managing bank accounts has become an extremely complicated and time consuming process. As such, treasury personnel – who are spread thin at the best of times – are often responsible for hundreds, if not thousands, of bank accounts in numerous countries across the globe. This can lead to unnecessarily high processing costs and significant inefficiencies for all parties involved.

E-invoicing – the bigger picture

4 February 2011
As regulators in some markets begin to push for e-invoicing uptake, it will encourage banks and other market participants to create interoperable solutions that make it easier for companies of all sizes to make use of electronic invoicing. As part of this, einvoicing must move beyond a stand-alone product and be incorporated into larger financial supply chain solutions. In an era of economic uncertainty, companies want and will invest only in those projects that promise significant and sustainable cost reductions with little upfront spend and an easily identifiable return on investment. E-invoicing holds that promise, particularly when incorporated into larger financial supply chain re-engineering.

From Russia with love

4 February 2011
In a scene that could have come straight out of a Bond film, 2010 was a dramatic year for Russia, seeing the world’s largest spy swap since the Cold War taking place with the United States. Another coup came with the nation’s successful bid to host the 2018 FIFA World Cup. So all eyes are on Russia and 2011 promises to be a crucial year for the country, as FX-MM discovers. With coastline on the Arctic, Atlantic and Pacific oceans, Russia covers much of the northern part of Eurasia. The largest country in the world and a major exporter of commodities, Russia is known for being a place of extremes: its climate is diverse, ranging from subarctic to subtropical, and the contrast of wealth in the country is equally exaggerated.

Treasury Operations Handbook

4 February 2011
There has been a gap in the market for a book like this for some time and the Treasury Operations Handbook looks set to fill it. If you want a good reference text for back office functions in a Treasury operation, then this is it. The handbook is also extremely useful for ACI Operations Certificate candidates (who seem to have been forgotten up to now) as the chapters are laid out and follow the 3I0-010 syllabus. One of the most difficult tasks for an author of technical handbooks is conveying complex processes in easy to understand language. Phil Parker has successfully achieved this, explaining the fundamentals of treasury operations, avoiding jargon and detailing all issues in layman’s terms, with many helpful worked examples.

EMU: What Everyone Must Understand about European Economic and Monetary Union

4 February 2011
The seriousness of the debt crisis has raised existential questions about the European Economic and Monetary Union, not just from the euro sceptics, but by those who have been sympathetic to the great experiment (of monetary union without fiscal union). There are two important points that influence our analysis that appear to be often lost on most observers: the political nature of the union and its evolving institutional framework.