BofE FX Survey data: FX vols recover in April 14 at $2,758bln/day (+6.6% on Oct 13, and -8.8% YonY) – interesting trends


The Bank of England today released their latest semi-annual FX turnover survey results for April 2014.

Highlights on London FX volumes for April 2014

  • FX vol  of $2,758bln/day, +$171bln/day, which is +6.6% from Oct13 (although still -8.8% YoY)
  • MDP vol of +15% from Oct13 at $362bln/day (+4% YonY)
  • SDP vol -8% from Oct13 at $309bln/day (-16% YonY)
  • Ratio of SDP/MDP vols at new low of 85% from 107% in Oct

Below are full details, charts and some interesting observations on the data. Continue reading

New investment banking models: ‘capital-lite’, ‘agency’ and ‘client-clearing’


Regulation is driving change in capital market structure, and as highlighted in the future of investment banking, banks continue to move towards a ‘capital-lite’ business model, as they seek to ‘optimise’ use of and return on capital.

The introduction of mandatory trading and clearing for standardised swaps (SEFs in US and OTF and MTFs in Europe) has resulted in higher capital charges for OTC bilateral trades, and reduced the appetite of banks to warehouse and hold inventory which is moving more banks towards a ‘capital lite’ model.

This is the backdrop to the announcement that JP Morgan the setting up a 150 strong fixed income agency execution desk called JP Morgan Execution Services (JPMES), to run alongside its principal trading operations.

At first sight, it looks as if JP Morgan is simply hedging its bets and backing both agency and principal business models. However,
Continue reading

Caplin’s ‘award winning technology’ helping regional banks accelerate delivery of SDPs


We have discussed before how regional (commercial) banks have been ‘upping their game’, investing in talented e-commerce people, enhancing their back-end pricing technology and importantly investing in new client facing single-dealer platforms (SDPs).

As a result of this focused investment, regional banks have been steadily gaining market share, sometimes at the expense of the large global banks as they deliver ever greater value to their client franchise through their SDPs.

This trend can be clearly seen in the chart below Continue reading

Fixing the Fix


The Swiss based Financial Stability Board (FSB), has published an interesting consultative paper, Foreign Exchange Benchmarks Consultative Report.

The paper looks at FX market structure, and how that created incentives for market malpractice – mainly in the form of allegations of front running client orders, collusion between bank dealers sharing information on client orders, and manipulation of rates during fixing – linked to the structure of trading around the benchmark fixings. The paper makes recommendations to address these adverse incentives as well as examining how to improve the construction of the benchmarks themselves.

The main FX benchmarks used by market participants are the WM/Reuters London and ECB reference rate. Unlike Libor, these benchmarks are based on actual trading activity during a fixing window. FX benchmarks are used by market participants for a variety of purposes, but most notably for valuing, transferring and rebalancing multi-currency asset portfolios.

This market structure creates what the report terms as an: Continue reading

Platform FX Volumes Jun14: Record vols at FXall, with all platforms showing gains


The main OTC FX platforms have now reported their June 2014 volumes.

Volumes up across the board, led by FXall which continues to power ahead delivering a new record volumes of $141bln/day up 11pct on May, compared to more modest gains for other platform ranging from +5% to +8%. In terms of YoY changes, FXall is still the only platform showing gains with a 14.6% gain on Jun 13, whereas all the other platforms are still showing hefty falls ranging from down -25% to -40% on a year ago.

The uptick in volumes is reflected in the CLS settlement platform, which also reported a 13% increase to $5.46trn/day in terms of the value of trades submitted by banks for settlement.

Continue reading

Tibco Streambase 2014 FX Trading Technology survey


After a two-year break, during which Tibco acquired Streambase, it’s good to see that they are continuing the excellent FX Trading and Technology Trends survey, that Streambase published between 2010-12 (see here for 2011 and 2012 surveys).

I haven’t yet seen this years report, but if it’s similar to previous survey’s then it will focus on buy-side and sell-side traders and their use of electronic FX platforms.

Key findings being:

  • Share of FX participants trading electronically remains steady at 80%
  • Regulation seen as providing opportunities for innovation and competitive differentiation
  • Traders prefer executing on SDP to MDP
  • Expectation that bilateral relationship pricing from liquidity providers enhances execution quality
  • Fragmentation driving more firms are add additional liquidity providers via aggregation services

Top banks Continue reading

The future of Investment Banking (Oliver Wyman/Morgan Stanley)


What’s the outlook for Investment Banking in 2014 and beyond?

Well, according to a new report published by Oliver Wyman and Morgan Stanley, banks need to act fast and re-allocate capital and resources to optimise where they have real advantage, and focus regionally and domestically.

The report which includes results of client surveys suggests clients plan to ‘polarize’ their spend on partner banks and specialists in areas such as servicing multi-asset, whilst squeezing the rest.

This is a really fascinating report (link available at end of this post), well worth taking the time to read, some key takeaways from the report are:

Market under-estimates scope for wholesale banks to increase returns as they are forced to focus on business optimisation and resource allocations

Drivers being: Continue reading

FX Sales practices


As reported last week by Bloomberg, the NY Department of Justice (DOJ) appears to be questioning a number of banks about the practice by sales desks to add ‘hard’ mark-ups to client FX trades.

The article suggests the DOJ is exploring whether the banks have committed fraud by failing to disclose the practice properly to customers.

Indeed, David Woolcock of the ACI is quoted as saying;

“Banks should always be transparent with their clients on pricing mechanisms…… This does not sound like it is consistent with best practice nor ethical behavior.”

What we are talking about here is the possibility that Continue reading

World’s Strongest banks


Bloomberg has released their latest and very interesting “World’s Strongest Bank” analysis, that ranked 97 banks with assets of at least $100bln in assets.

Rankings were determined by five criteria, in order of importance:

1. Ratio of Tier 1 capital to risk-weighted assets
2. Ratio of nonperforming assets to total assets
3. Ratio of reserves for loan losses to nonperforming assets
4. Ratio of deposits to funding
5. Ratio of costs to revenues

EMEA has 9 of the top banks followed by Asia with 8 and Americas with only 4, of which three are Canadian.

The actual rankings are as follows:

Continue reading

CLS FX volumes barely changed in May $4.82trn/day


Data from CLS for May 2014 shows a 0.65% rise in the value of FX trades submitted to CLS for settlement at $4.82trn/day up from April’s figure of $4.79trn/day, which was the lowest since Aug 13.

CLS value of instructions submitted: $4.820trn/day, up 0.65% on the $4.79trn/day in Apr 2014, and some 1% lower than the May 2013 level of $4.87trn/day.

CLS number of instructions submitted: 977,460, was down 0.6% on the 983,850 in Apr 2014, and still some -26.5% down compared to May 2013 level of 1,329.316.

 

CLS May 14

Follow

Get every new post delivered to your Inbox.

Join 978 other followers