Are FICC markets ‘effective and fair’?

The Fair and Effective Markets Review (FEMR) has today published a consultation document (available on the Bank of England website), on what needs to be done to reinforce confidence in the fairness and effectiveness of the Fixed Income, Currency and Commodities (FICC) markets.

The Review was established by the Chancellor in June 2014, to conduct a comprehensive and forward-looking assessment of the way wholesale financial markets operate, to help to restore trust in those markets in the wake of a number of recent high-profile abuses, and to influence the international debate on trading practices.

To have lasting impact, the Review intends to Continue reading

Regional banks looking at Fixed Income SDPs

The evolving regulatory regimes and mandates of Dodd-Frank, Volcker Rule, EMIR, MiFid II and Basel capital reforms are designed to increase transparency, reduce risk and drive OTC derivatives markets onto transparent and regulated markets and platforms.

As a result banks are radically changing, (and indeed cannibalizing) business models within the fixed income (FICC) businesses, pulling back or even withdrawing from more capital-intensive inventory based market-making activities in products such as credits as they move towards what is called a ‘capital light operating model’.

Banks are now specialising around core skills, value propositions and client franchise, with a reduction in those willing to be flow banks, whilst others specialise in execution capabilities around an agency model. As a result, clients will be offered execution services from banks that will be a blend of principal/agency, bilateral/cleared, all of which requiring investment by dealers in new technology and connectivity pipes to execution venues such as SEFs, post-trade reporting (TR) repositories, central clearing houses (CCPs) and more.

So, what’s happening in Europe in terms of fixed income e-trading, and in particular what’s the future for single-dealer platforms in fixed income? Continue reading

24 European Banks fail ‘Stress Tests’ – 9 of them Italian!

The European Banking Authority (EBA), has released the results of ‘Stress Tests’ on 123 banking entities in Europe. The tests were designed to test the resilience of banks to adverse economic conditions.

The stress tests are based on common macroeconomic scenarios and a consistent methodology and unparalleled transparency into banks’ balance sheets and the potential impact of severe but plausible shocks on them.

The impact of the stress test is assessed in terms of the CRD IV Common Equity Tier 1 ratio for which a 5.5% and 8.0% rate are defined for the adverse and the baseline scenario respectively.

Some 24 banks (20%) failed the tests, of which 9 were Italian.

Here is a list of failed banks:

Banks that failed Stress Tests

 Shortfall for individual banks 2016 under the adverse scenario, capital raised or converted in 2014 and net shortfall (EUR BN) 

Full report available here, and individual bank stress test results and interactive visual display tools here.

CLS FX vols Sep 14: Record vols up $1Trn/day (+21.2%) to $5,940bln/day

Confirming the increased vols seem from the major FX platforms, the FX industry settlement platform CLS, today reported Sept 2014 figures, which saw volumes shoot up by $1trn/day to a new record of $5,940bln/day.

Details from the platform and charts are as follows: Continue reading

JP Morgan, Citi, BAML, GS: Q3/14 results: Strong performance in Markets – Fixed Income division

JP Morgan kicks off the Q3/14 reporting season with a strong set of results, with net income at $5.6B.

The Markets & Investor Services revenue was particularly strong with Markets revenue of $4.7B, up 1% YoY, primarily driven by:

Fixed Income Markets of $3.5B, up 2% YoY, driven by stronger revenue in currencies and emerging markets

Equity Markets of $1.2B, down 1% YoY, primarily on lower derivatives revenue

The results confirm JP Morgan as #1 in Total Markets revenue share of top 10 investment banks

Full JP Morgan results here and here, below are summary of results from Citigroup, Bank America and Goldman Sachs. Continue reading

New Caplin white paper ‘Trading On The Move’

Caplin Systems has published a new white paper entitled Trading On The Move, which examines the growing demand for, and use of mobile devices in the capital markets.

The paper authored by Patrick Myles, Caplin CTO explores the mobile revolution and looks at how it is being applied to the capital markets.

Drawing on results from a recent Caplin Systems e-Trading survey, the paper identifies current supply-demand imbalances between what the buy-side say they want, and what the sell-side think their clients want, compared to what they currently provide to clients.

Responses from the survey suggested that: Continue reading

Platform FX vols Sept 2014: Strong rebound for all major platforms, led by EBS +38%

FX vols of the major platforms showed solid gains in September, led by EBS which was up +37.9%, Thomson Reuters Spot up +34.6%, and Hotspot up+32.3% in Sept.

Detailed volumes were:

EBS $117.9bn/day in Sept, up +37.9% on Aug, and up +45.2% compared to Sept 13 level of $81bln/day.

Hotspot: $38.2bn/day in Sept, up -32.3% on Aug, and up +33.2% compared to Sept 13 level of $29bln/day.

Reuters total: $418bn/day in Sept, up 17.7% on Aug, and up 33.1% compared to Sept 13 level of $314bn/day.

Reuters Spot: $144bn/day in Sept, up 34.6% on Aug, and up 20.5% compared to Sept 13 level of $120bn/day.

Individual volume figures and charts for the platforms are summarized below: Continue reading


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