October 2011

Aussie rules: Changing the game in equities trading

11 October 2011
Market fragmentation and venue competition is an almost irresistible global trend, spurred initially in most regions by regulation. As Australia looks set to follow suit with the ASIC’s Market Integrity Rules, Steve Grob, Director of Group Strategy at Fidessa, looks at the different regulations across the globe and explores the possible effects in Australia.With ASX’s launch of its new smart order routing system, ASX Best, the arrival of its VolumeMatch and PureMatch venues, and the forth - coming go-live of Chi-X in Australia, it is clear that the trading landscape there is going through a period of rapid transformation and re-alignment. If, as seems likely, Australia follows a similar pattern to that seen in European and North American markets, then liquidity fragmentation and other venues, both dark and lit, will follow.

FX best practice

11 October 2011
The execution methods employed for foreign exchange currency trades have become an important consideration in the achievement of trading strategies and objectives. Phil Weisberg, CEO of FXall, explores the necessity and benefits of thoughtful execution policies in light of the increased attention by regulators and investors on how risks are managed within financial markets.Regulatory reform in the US and Europe is changing the financial market structure, considerably and irreversibly. A common thread throughout the financial markets is the resolve from regulators, policymakers and market participants to increase transparency, reduce systemic risk and strengthen investor confidence. Across all asset classes, the implementation of “thoughtful execution” practices is now almost unanimously considered a critical part of ensuring protection for the end investors.

QuantumFX: A new pool of liquidity

11 October 2011
Well-established in the retail market, Alpari entered the institutional market last year by bringing a new pool of liquidity with the launch of QuantumFX. Mark Davison, Global Head of Institutional Sales at Alpari (UK), who oversaw the launch, talks to Frances Maguire about the importance of being different.The Alpari companies already make up one of the largest global foreign exchange retail brokers, with more than 170,000 active accounts and hitting a new record monthly trading volume of $210 billion in May, representing a 31% growth in just six months.Having already built up a strong retail brokerage brand, in 2010 Alpari entered the institutional business, and did so with a twist, launching a state-of-the-art trading platform to provide corporates, hedge funds, banks and high frequency trading institutions globally with access to a diverse and deep liquidity pool via a central clearing counter-party model with multiple execution mechanisms.

The edge of the precipice

11 October 2011
The world has teetered on the brink of financial collapse for so long that it seems that the markets are now ruled as much by fear as reality. Over the last few months the global financial system has shown just how complicated it really is and in a strange paradox, brought about by the continual state of anxiety, it has shown that it can be both robust and delicate at the same time. That is not to say that the hardship being felt is anything other than substantial and high unemployment levels in all major developed economies are taking their toll.The difficult situation in the world economy is forcing political leaders and the financial authorities to come together to find solutions which will pull the world back from the precipice. It is not a lack of ideas that is the issue but rather the lack of definitive action. The Sovereign Debt crisis in Europe, the danger of a US recession, rising global prices and the hope that emerging markets will drive growth are all part of the mix. Recession reality is now outpacing recession fear in the US, and Greece seems to be moving toward default of some kind. Time seems to be running out for solutions to be found.

Let’s move in together

11 October 2011
Originally used for exchange trading, co-location is now being embraced by the FX market but as Frances Maguire reports it is not only being used to lower latency but to create hubs to connect to the multiple ECNs and banks needed to trade FX.The need to eliminate latency from execution first drove the equities and derivatives players to co-locate their servers near, or within, the buildings of the world’s exchanges. This is not as straight-forward for the foreign exchange markets, however, as there are a multitude of liquidity pools and execution venues to choose from and as a result a growing breed of new technology solutions are being built to offer managed application hosting, exchange connectivity or proximity hosting to the foreign exchange markets. ]FCM360 specialises in turnkey data centre solutions for traders and exchanges. This includes proximity hosting for high frequency trading, low latency trading, automated trading, algorithmic trading and exchange connectivity. It provides ultra low latency proximity hosting, co-location and connectivity to the major foreign exchange (FX) marketplaces for high frequency trading (HFT) and algorithmic trading by building its infrastructure in the same buildings as major liquidity pools, exchanges, crossing engines and low latency news feeds. These include marketplaces such as Thomson Reuters Dealing 3000, Currenex, Knight Hotspot FX, Integral, FXall and Lava FX, ICAP EBS, Gain Capital, major bank liquidity providers as well as Thomson Reuters Machine Readable News (News Feed Direct) and Need to Know News. Its client base covers trading houses, liquidity aggregators and software ISVs.

A look at iGATE Patni

11 October 2011
Fred M. Cohen, Group VP and Global Head of Capital Markets and Investment Banking at Patni, tells FX-MM about his company’s business. Can you provide quick background on Patni? What is its background in banking and finance?iGATE-Patni is a recent merger of two leading global providers of IT services and business solutions, now with over 25,000 professional staff.In the FS space, iGATE-Patni has 30 years of experience dealing with large corporate financial institutions and banks. We help clients maintain compliance, transform IT costs, mitigate risk and better manage and centralise data.The reference data management practice has extensive expertise in optimising data architectures, expertise in implementing market leading reference data management platforms, and a business process outsourcing group currently delivering manual reference data cleansing services to a number of major organisations.

The Great Depression – Are there parallels between 1930s America and present day Europe?

11 October 2011
If ever there were a time to reflect back on history and consider what lessons can be learned from past mistakes, a good place to start would be the Great Depression of the 1930s; a financial collapse so immense that the US and the world at large suffered for almost a decade with high unemployment and slow growth. The roots of the Great Depression go back to 1928 – back then it was the Federal Reserve’s monetary policy that triggered the financial meltdown and the economic stagnation which followed.Comparisons can be drawn with today’s financial troubles in Europe and how the European Central Bank has acted in the face of similar slowdowns, prioritising inflationary concerns over growth and a reluctance to inject liquidity into the system.

Invoice automation: The ticket to greater efficiency and savings

11 October 2011
150 billion invoices are processed across Europe annually. A majority of them are still being managed manually. And that’s costing business billions. By Drew Hofler, Senior Manager Financial Solutions, Ariba Inc.In 2011, roughly five million businesses and 75 million consumers are expected to send or receive more than 150 billion electronic invoices. And according to research from Billentis, they will shave between 60 percent and 80 percent off paperbased processing costs (E Invoicing/E Billing in Europe and Abroad: From Evolution to Revolution).Unfortunately, far more companies will continue to process invoices manually. And they will miss savings opportunities and lose productivity as a result. Industry analysts estimate that 85 percent of invoices and payments are still sent on paper at a cost of more than $650 billion a year.

Kenya – ‘‘The Cradle of Humanity’’ and the Hub of East Africa – Getting ready for the world stage

11 October 2011
Stretching over just 580,000km and situated centrally between Tanzania, Uganda, Somalia, Ethiopia with access to South Sudan, it is with plausible reasoning that Kenya is developing and re-branding itself into the East African regional hub as the entry point of choice into Africa for businesses around the globe.Kenya’s political history is rich with reforms and has travelled a rocky road to the stable democratic government that is in place today. The recent constitutional reforms paint a bright future for growth and development, providing a solid standing in which to tackle the challenges ahead in order to achieve its middle income ambitions. The landslide election that ousted the old regime in 2002 installed Mwai Kibaki as President who signed into law a new constitution, thus allowing for a more decentralised government, limiting the powers of the President and the creation of a Senate. The country has now re-orientated once more to push ahead positioning Kenya as a substantial player within the African regional economy.

60 second interview

11 October 2011
In this edition, FX-MM puts Kevin Grant, CEO of IT2, in the hot-seat to find out his views on the financial crisis, issues affecting the Global Treasury space and the future of IT2. What do you see as the biggest driver in the Global Treasury space right now?A simple answer: the biggest driver in global treasury remains what it has always been. That is, the need to provide cash when and where it’s required, in the most cost-effective way possible.What’s needed to achieve that, however, just got very much harder. As an obvious example, obtaining a sensible view of the future in order to hedge commodities or FX has got harder. Even working out the costs and implications of ‘vanilla’ bank funding – ostensibly a simple matter of interest and loan facilities – depends on understanding the risk profile of your bank and its business objectives now that your bank is itself looking at risk weighting and liquidity across its entire relationship, as well as its return on a particular facility.