Nasdaq prepares to launch own FX platform


Exchanges can’t seem to get enough of FX!

Following the recent spate of exchanges buying FX platforms (Deutsche Boerse buying 360T, BATS Global Trading buying Hotspot, and talk of ICE buying FastMatch), we now hear Nasdaq is readying the launch of their new FX platform.

NasdaqSo, what’s the attraction?

Well, for one thing size, at $5.3tn/day, it’s by far the largest globally traded market. It’s predominantly a bilaterally traded OTC market, highly liquid and although decentralized and fragmented into multiple liquidity pools, is nonetheless very efficient and increasingly electronically executed.

The size and liquid nature of the market play to the scale and efficiency of exchange infrastructure.

But, this is about more than size. Continue reading

Markit to consolidate position in FX Trade processing with Dealhub acquisition


Just spotted this on Bobsguide, a very interesting development.

Markit Markit has agreed to acquire Dealhub, the 55 strong UK company that provide FX solutions to banks, brokers and other financial market participants around market connectivity, trading services and trade processing.

The acquisition comes less than two weeks after Markit’s own MarkitSERV announced the launch of its new ‘centralised FX trade confirmation service’. The Dealhub transaction, looks highly complementary, and will enable Markit to rapidly consolidate its position in this space.

As the industry continues to innovate, and in response to evolving FX regulations, there will naturally be increased demand for efficient, scalable and innovative centralised FX solutions, that provide the market connectivity to the various venues, credit-hubs, settlement systems, trade repositories, clearing houses with the associated regulatory reporting needed to enable participants to effectively manage their FX business.

According to the press release; the acquisition will enable Markit to offer customers a comprehensive solution for FX across venue connectivity, trading services, trade confirmation and management, clearing and regulatory reporting.  It will also expand Markit’s customer base among banks, brokers and asset managers in the FX markets.

Brad Levy, managing director and head of Markit’s Processing division, said:

“DealHub is a great company and highly complementary to Markit’s growing FX processing business.  This acquisition adds depth to our FX offering while bringing an exciting set of trading solutions to Markit.  Connecting DealHub’s technology to our network will accelerate centralisation of FX trade processes, making it easier for customers to transact.”

Dealhub

Peter Kriskinans, founder and chief executive officer of DealHub, said:

“We are excited about joining Markit since our businesses are so complementary.  Markit’s scale and global reach will allow us to better support our customers and will also accelerate innovation and further development of our technology.”

DealHub’s customers include global banks, regional banks, interdealer brokers, FX electronic trading venues and asset managers.  The company has approximately 55 people based primarily in London, with additional offices in New York and Singapore.

BIS establishes working group to strengthen code of conduct standards and principles in FX markets


In the recent release of ‘The Fair and Effective Markets Review’ FEMR, into how to restore trust in FICC markets, the report made the following recommendations in sections 4a and 4b:

4. Launch international action to raise standards in global FICC markets

a. Agree a single global FX code, providing: principles to govern trading practices and standards for venues; examples and guidelines for behaviors; and tools for promoting adherence. The Review strongly welcomes the recent announcement by central banks to work towards those goals; (BIS and national central banks including the Bank of England 4.3.3)

b. As part of that work, improve the controls and transparency around FX market practices, including ‘last look’, ‘time stamping’ and ‘internalisation’ (BIS and national central banks including the Bank of England 4.3.3)

Following the recommendations The Bank of International Settlements (BIS), has now Continue reading

Poll results: Last look, lack of time-stamp and internalisation of flows – Which practice is most open to abuse?


A few weeks ago, we explored last look’, ‘time stamping’ and ‘internalisation’three practices that The Fair and Effective Markets Review FEMR, felt needed improved controls to help restore trust in FICC markets.

At the end of the post, I opened a poll asking buyside and sellside readers: “Which of the three practices are most open to abuse, resulting in sub-optimal client execution?”

The results, though limited and highly unscientific, are nonetheless interesting, as they highlight the almost diametrically opposite opinions of buyside and sellside. Buyside readers, overwhelmingly thought that the practice of ‘last-look’ was most open to abuse.

Whereas sellside readers, who are at the sharper end of this, felt that although last-look was open to abuse, ‘lack of time stamping orders/trades ‘was far more likely to result in sub-optimal client execution.

Poll results on Sellside practicesPoll results from unscientific and limited study asking “Which of the three practices are most open to abuse, resulting in sub-optimal client execution?”

FX Platform consolidation: 360T sold to Deutsche Boerse for €750m (as previously mentioned)


As first mentioned last month, the multi-bank FX platform 360T has now been sold to exchange operator, Deutsche Boerse for €750m ($805m), beating off interest from rival exchange operator CME Group.

360TThe transaction, which was announced today (Sunday), is the latest in a string of recent FX platform transactions, which I guess started with FXall being bought by ThomsonReuters back in 2012, and which may well see FastMatch as the next target, with exchange operator ICE as rumored suitor.

Platform costs based on daily volumes2Table showing relative costs of platforms in terms of (A) $bln daily vol, (B) cost/institutional client

Although not confirmed, I would think CME group was attracted to 360T’s dealer-client franchise. As it played to the client clearing capital efficiency proposition that CME has been developing, helping to facilitate bank-client trading relationships by mitigating counter-party risk, rather than competing for the execution of the transaction.

So, having lost out on 360T, it’s certainly possible that CME may cast an eye over Fastmatch as it would also open new clearing opportunities.

Corporate Bond platform Bondcube closes (after only 3mths)


Higher costs of regulatory capital, has resulted in a massive reduction in bond inventory held by primary dealers, and as a result, banks have been withdrawing from capital-intensive market making operations and embracing so-called ‘capital lite’ agency type operating model.

According to a report from McKinsey and Greenwich Associates, broker-dealers will need to leverage e-trading technology far more to assist their clients in liquidity discovery and help them with trade execution, as it has become increasingly difficult to find the ‘other side of the trade’. As can be seen from the graph below Continue reading

Fair and Effective Markets Review (FEMR) releases Final Report


The Fair and Effective Markets Review today published its Final Report (see link at bottom of post), which sets out 21 recommendations to help restore trust in the wholesale Fixed Income, Currency and Commodity (FICC) markets.  The Review was established by the Chancellor of the Exchequer and Governor of the Bank of England in June 2014 to help to restore trust in those markets in the wake of a number of recent high-profile abuses. Back in October the FEMR 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 FICC markets.

The final report from the FEMR is centred on the following principles: Continue reading

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