Interesting story today by IFR-FX trade morphs as new regulations loom
The thrust of the article being that FX business models of banks (and clients) will need to be overhauled in the face of the shifting regulatory landscape, and that Bank Single Dealer Platforms (SDP) will need to adapt to support new routing protocols to SEFs, Central Clearing Houses (CCPs) and Trade Repositories.
At Caplin, we have been consistently saying that Single Dealer Platforms will remain the relationship channel of choice, through which banks enable clients to manage risk, and access liquidity, whether directly from the bank, or routed through to SEFs for cleared products.
Infact, a few of the quotes in the article could almost have been lifted from my earlier blogs such as:
Kevin Richards Global Head of FX Derivs, Spot and e-trading at Deutsche: “Certain products in certain jurisdictions with certain clients will go to an exchange, similar to the equities world“.
Vincent Craignou Head of FX, Metals and Derivs at HSBC: “In any case, e-commerce platforms will still add value regardless of the final SEF definition, said Vincent Craignou, head of FX and precious metals derivatives at HSBC in London. For example, single-dealer platforms can be used to route to SEFs, he said, and clients should still be able to glean value from the platform’s execution and risk management capabilities”
My Blog on 6th may 2011:
Route to SEF (for NDF/FX Options): Like with equities or futures, banks should prepare to enable clients to request price quotes for NDFs/FX options, and where those instruments mandated to (and actually are available) on a SEF, then route the request to the SEF, otherwise the bank will continue to quote, but all done from within the SDP
Good to know great minds think alike!