Latest BIS FX data on Single Dealer Platforms

Single Dealer Platforms (SDPs) accounted for 28% of all eFX trading, according to detailed data just released from the Bank of International Settlements (BIS) 2010 Triennial survey (page 16) covering the Global FX Markets (compared to 30% in 2007), with Multi Dealer Platforms share being slightly lower at 27%.

An engaging User Experience (UX) is more than skin deep

photo by ratterrell on Flickr

Here’s an interesting article on TABBForum:
Show me some skin

It’s great to see the attention product and information design is getting at the moment. At Caplin we blend these skills with interaction design and many others into our UX design practice for Single-Dealer Platforms.

Whilst the GUI is often seen AS the product, you have to consider the unseen design research and development that goes into producing a truly engaging user experience.

Really great GUI is not cosmetic gewgaw. Really great GUI facilitates interaction flow and engages users in an experience that’s more than skin deep.

Société Générale Launches New e-Trading Platform

From Profit and Loss: login required

Monday 22nd November 2010 09:00:00

FX Week has also covered the story: login required

SocGen pushes Alpha FX, drops First Access:

FX Markets Lobby US Treasury to exempt FX from Dodd-Frank

The “Global FX Division” of AFME, SIFMA and ASIFMA (three global FX Trade bodies)  have written to the US Treasury setting out clearly, why FX Swaps and Forwards should be exempt from Dodd Frank legislation (full letter here)

Wall Street Journal carries the story today (may need to subscribe) on the letter, citing an extract in which the trade lobby;

warned that pushing currency swaps and forwards onto exchange-type trading systems would be unnecessary, of little benefit and potentially “catastrophic.”

The Global  FX Division site the following key reasons to exempt FX:

  1. The Foreign Exchange Market, Including FX Forwards and FX Swaps, Is Qualitatively Different From Derivatives Markets and Should Be Overseen by Central Banks, Including the Federal Reserve as the U.S. Central Bank
  2. The FX Market Is a Global Payment System with a Well-Developed Settlement System That Has Effectively Mitigated Systemic Risk.
  3. Imposing Mandatory Trading and Clearing on the FX Market Would IncreaseSystemic Risk and Threaten Financial Stability.
  4. Central Banks Actively Oversee and Are the Appropriate Primary Regulators ofthe FX Market.
  5. The Federal Reserve Has Authority to Regulate “Systemically Important” Payment Activities and Designated Activities by Financial Institutions Under Title VIII of the Dodd-Frank Act.
  6. Regulators Have Ample Tools to Address Any Potential Abuses of the Exemption to Evade Otherwise Applicable Regulatory Requirements.

They further state:

Mandatory exchange or SEF trading is unnecessary and would decrease liquidity in the FX market.

The letter is well worth reading for all participants in the FX market, and especially those involved in electronic trading and eFX.

BIS Data shows most CDS trades not be suitable for trading on a SEF

The Bank of International Settlements (BIS) today released data covering outstanding positions in the global OTC Derivatives markets.

Whilst overall outstanding OTC positions are down some 4% to $583 trillion, gross market value of existing OTC contracts rose by 15% to $25 trillion.

Notional amounts of Credit Default Swaps (CDS) outstanding declined for the 5th semiannual period (due to terminations of existing contracts).

Interesting to note that the BIS has for the first time included Central Counterparties (CCP) in the breakdown of outstanding contracts by counterparty for CDS positions. Although further reading shows that CCP accounted for only 11% of outstanding CDS positions. This relatively low figure reflecting the “non-standard” nature of much of the CDS positions captured by the BIS survey (see section 3.2 on page 6 of report).

So, if the vast majority of CDS positions are non-standard, and thus not suitable for clearing by CCP, does that not also imply that the vast majority of CDS trades would  therefore also be exempt from having to trade on a ‘SEF’?

IRS Pre-trade Transparency

Saw an update from ISDA recently. They have released the results of a blind test to assess the transparency & competitiveness of the plain vanilla USD & Euro swap market. In short, it’s a competitive & transparent market, with maximum spread between best & worst swap rates at 1.3 basis points.

Makes me wonder what evidence was used to justify the SEF requirements in Dodd-Frank. When I google for “evidence for swap execution facility” I cannot see any clear economic evidence for a SEF that would lead me to reject the analysis by ISDA.

Can anyone help?

Paul Caplin talks to Kevin McPartland about SDPs

On November 9th Paul Caplin was interviewed by Kevin McPartland, senior analyst at the TabbGroup about the evolution of single-dealer platforms and their conversation was recorded for the TabbFORUM.

The six minute recording is now available by clicking here.