How should Investment Banks capitalise on the new Apple Watch for financial trading? (from Caplin’s tech blog)

At Caplin we run two blogs. This business focused blog, and our hugely popular tech blog called Platformability.

The tech blog mainly deals with technology issues, particularly those surrounding agile development and using native web technologies to build high-performance real-time web apps for financial trading.

It also looks at UX design, code testing and occasionally more diverse topics such as the psychology of UX design or how office environments can be, or not be, conducive to productive work.

As the audiences for the two blogs tend to be quite different, we rarely cross-post between the blogs.

However, given that today sees the new Apple Watch going on sale (apparently only in six stores globally), our tech team has marked the occasion by posting a discussion on how the Apple watch might be used by banks in finance, and it’s certainly worth a read.

With the launch of the Apple Watch Caplin wanted to board the wearable tech bandwagon. We wanted to ask the questions why and how should a sell side Investment Bank want to use wearable tech?

How should Investment Banks  capitalise on the new Apple Watch for financial trading?

Here is a link to the full post: How should Investment Banks capitalise on the new Apple Watch for financial trading?

FX Platforms – Mar 15 vol: Solid gains across the board

The major OTC FX platforms have now reported their March 15 volumes. All the platforms reported strong gains following weak February figures.

Looking in more detail we see the individual platform figures as follows:

EBS $114.5bn/day in Mar, up a healthy +21.7% on Feb, and up +29.5% compared to Mar 14 level of $88.4bn/day. Continue reading

CLS FX Settlement platform Feb15: Vols down -8.3% to $4,870bln/day

The CLS settlement system has reported an -8.3% drop in the average daily value of FX trades settled through their platform in Feb 15, taking volumes back to the Dec 14 levels of $4,870bln/day.

The monthly drop is to far lower than that reported last week by the major FX spot platforms which saw falls ranging from down -15% to -27%.

Details from the platform and charts are as follows:

CLS value of instructions submitted: $4,870bln/day, down -8.3% on the $5,310bln/day in Jan 15, and down -5.4% compared to Feb 14.

CLS number of instructions submitted: 1,185,696 was down -16.5% on the 1,,419,369 in Jan 15, although still +3% up on Feb 14 level of 1,150,663.

Average Trade size: $4.1mln was up 10% on the $3.74mln in Jan 15 although still down -8.2% compared to the $4.48mln in Feb 14.

David Puth, CEO of CLS, commented: Continue reading

Wholesale & Investment Banking Outlook 2015 – (Excellent Oliver Wyman/Morgan Stanley report)

According to an excellent new report from Oliver Wyman and Morgan Stanley (which is well worth reading), financial regulation and QE are at the heart of a huge shift in liquidity risk from banks to the buy-side, which is increasingly a concern for policy makers.

  • The shift is far from over, liquidity in sell-side markets set to deteriorate further, as regulation shrinks banks’ capacity another 10-15% over the next two years.
  • Regulatory risks are rising for asset managers, as policy makers worry about the risks to financial stability from US QE exit and market structure changes.
  • For the banks, diminishing returns on capital from market making demand even greater efficiency, dexterity and scale to achieve 10-12% returns.

Capital required to make a buck

Capital required to generate $1 of revenues greatly increased across FICC markets

Balance sheet shrinkage

 Balance sheet shrinkage across FICC

There is a liquidity conundrum in fixed income markets facing policy makers and investors: how it’s resolved will have long-term investment implications across banks, asset managers and infrastructure players.

  • Huge shift in liquidity risks to the buy-side as the twin forces of financial regulation and QE have played out.
    • Severe reduction in sell-side balance sheet and banks’ liquidity provision.
    • Balance sheets supporting traded markets have decreased by 40% in risk weighted assets (RWA) terms and 20% in total balance sheet since 2010.
  • Liquidity of secondary fixed income markets is likely to get materially worse.
    • Expect another 10-15% shrinkage of fixed income balance sheet from the largest banks in the next 2 years. As much as 15-25% could be taken out of flow rates
  • Credit markets are the biggest challenge. Unresolved conflict in regulator desires to reduce the disconnectedness between banks to ensure that asset managers have sufficient liquidity to deliver on promises to their investors, and to preserve companies’ flexibility to issue in a wide range of markets.
  • Electronic trading and new marketplaces will grow – but will not solve the fundamental issues. New initiatives to increase electronic trading, new data networks, new agency execution models new marketplaces. However heterogeneity of products will limit how far electronification will go in fixed income markets.
    • FI markets entering a period of accelerating market structure change. A confluence of forces is driving this:

Economic pressures on dealers
Client concerns around liquidity
A desire to manage conduct risks relating to sales and trading activities
Mandated electronic trading (SEFs – Dodd Frank, OTFs -MIFID/EMIR)
New pre- and post-trade reporting requirements
Advances in technology

Fixed Income electronificationPenetration of electronic trading by asset class

Impact on Banks

To hit target returns, banks will need to push further on restructuring the business. We see huge potential for change, with three key areas of focus:

Strategic selection: more tough decisions, focused on FICC businesses and the international footprint
Client service models: shifting from people-based push services to technology-based pull services and being more selective with balance sheet extension
Operating model: shifting from proprietary infrastructure to supply chain based infrastructure

Whole report available here

FX Platforms – Feb 15 vol: Reuters spot vol down 15%

The major FX platforms have now reported Feb 15 volumes. Following the very strong Jan figures, volumes for February are down across the board, with EBS showing the biggest drop, down -27.4%, with Reuters  reporting a smaller -15.6% fall.

Looking in more detail we see the individual platform figures as follows: Continue reading

When liquidity disappeared – FXCM account of EURCHF liquidity in 40mins following SNB announcement

FXCM has published a very interesting account of what they saw in terms of pricing in EURCHF from their bank liquidity providers in the seconds and minutes following the SNB decision to remove the 1.2000 peg at 04:30 on January 15th.

January 15 Was A Market Flash Crash – The Institutional FX Market Failed And Did Not Function: The SNB’s surprise announcement caused a complete institutional FX market breakdown impacting liquidity, volatility, spreads, and execution. Unlike other recent major market events where FXCM’s liquidity providers continued quoting and providing consistent levels of liquidity, January 15 saw an extreme lack of liquidity and pricing

  • No Liquidity – There was almost no available liquidity for approximately 40 minutes
  • Dramatically Low Pricing – External ECN prices went as low as 0.2000 and 0.5000
  • Extreme Spreads – The average spreads of EUR/CHF were more than 2000-3000 pips
  • Extreme Range – The average range of EUR/CHF was 6000 pips

In the first 5 seconds after the EUR/CHF price Continue reading

EBS sees large drop in Feb 15 vols down over 27%

EBS the leading FX ECN has reported a large drop in FX volumes in Feb 2015 down some $35.5bln/day (-27.4%) compared to the strong start to the year as previously reported, which saw Jan 15 vols of $129.6bln/day (+23.7%), although still some 12.7% up on Feb 2014.

The drop brings vols back in line with the 12mth average vols, currently running at around $96bln/day, and reflects the reduction in volatility after the manic January moves triggered by the SNB’s removal of the EURCHF floor.

EBS chart Feb 15

EBS Feb 15 FX volumes

Elsewhere, Hotspot FX, the ECN sold to BATS also saw big falls in Feb vols at $26.4bln/day (-22.8%) compared to the  strong start to the year which saw Jan 15 vols of $34.3bn/day (+23.6%).

EBS & Hotspot FX Feb 15

EBS & Hotspot Feb 15 FX volumes

We will wait to see how EBS figures compare with Reuters who should report their volumes next week.


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