Interesting Celent report on future of Spot FX trading technology & platforms


Just finished reviewing an interesting Celent report by Brad Bailey, on evolving spot FX market structure and technology trends in light of changes in global regulation, a blurring of traditional liquidity pools and the ongoing competitive landscape.

Brad touches on a number of the themes we have covered here over the year, but it’s always good to have someone else’s perspective on them.

The themes covered being: Continue reading

Right-sizing in FICC – more cuts probably on the way


Last week, Morgan Stanley announced another wave of Fixed Income, Currencies and Commodities (FICC) redundancies. Some 1,200 due to leave the bank, of which around 500 (I have seen this equated to nearly 25%) coming from front-office FICC sales and trading positions, and many being at MD and above level.

In their Q3, 2015 figures released in Oct, they made mention of the underperformance in FICC:

  • Institutional Securities net revenues excluding DVA were $3.5 billion
  • continued strength in Equity sales and trading
  • leadership in Investment Banking with notable strength in M&A
  • underperformance in Fixed Income & Commodities sales and trading
  • FICC sales and trading net revenues of $583m down from $997m in Q3, 2014 primarily reflecting difficult market conditions for our credit and securitized products businesses

Indeed, looking at 2014 full year results below, we can see that FICC contributions to overall revenues have Continue reading

US regulators fine Barclays $150m for abuse of ‘last look’ (fascinating reading)


The NY Department of Financial Services (NYDFS), has handed Barclays an additional $150m penalty and ordered the bank to terminate an employee for what it called: ‘Automated, Electronic Foreign Exchange Trading Misconduct’

According to the NYDFS:

Barclays Used “Last Look” System to Automatically Reject Client Orders that Would Be Unprofitable Because of Subsequent Price Swings during Milliseconds-long Latency (“Hold”) Periods.

The additional fine brings the overall Barclays Foreign Exchange NYDFS Penalty to $635 Million.

That clearly explains why last month Barclays released ‘last look’ guidelines on their BARX website. In previous posts, I have argued that the practice of last look, in effect provides banks with ‘an option on the price’ that gives them an asymmetric advantage over their clients. The press release actually makes fascinating reading, and for that reason I have reproduced most of it below (the bold underline is from the original press release, and not my emphasis).

According to Anthony J. Albanese, Acting Superintendent of Financial Services” at NYDFS, in addition to the fines, Barclays would also: Continue reading

ICAP results, and strategy for Electronic Markets and Post Trade Services


ICAP today released first half results, confirmed the sale of the Global Broking Business (IGBB) to Tullett Prebon, and as part of their investor presentation, provided more details on the NewCo that will comprise Electronic Broking and PostTrade Services group.

In terms of result, group revenue fell 4% to £595m, although after stripping out ICBB, would show 4% rise, whilst revenues at TriOptima the post trade division rose 35%.

ICAP reported they had invested Continue reading

Could MiFID II be delayed by a year?


Earlier this week, Steven Maijoor, chairman of the European Securities Market Authority (ESMA), told MEPs that the timing for stakeholders and regulators alike to implement the rules and build the necessary IT systems (for MiFID II) is extremely tight.

Even more, there are a few areas where the calendar is already unfeasible. This relates to the fact that it will take some time, and well into 2016, before the text of the regulatory technical standards (RTS) will be stable and final.

According to Steven Maijoor, chairman of ESMA: Continue reading

Buyside to start paying for research under MiFID II


The introduction of MiFID II regulations around Transparency, BestEx and Inducements will change the relationship between buyside firms such as asset managers , and the sellside banks and brokers who service these clients (although non-financial clients such as corporates will be excluded). In particular, the regulations will lead to the ‘unbundling’ of research from execution, and the effect will fundamentally change the way in which buyside firms pay for, and consume research across all asset classes.

Traditionally, buyside firms have ‘paid’ for research through a Commission Sharing Agreement (CSA), whereby the executing broker would ‘retain’ a portion of the commission paid for the trade to use to pay for external research and other services for the client. Buyside fund managers would typically allocate commission attributable to research on the basis of ‘broker voting’. However, this was seen by the Financial Conduct Authority (FCA) (and more recently here) as an inducement to trade, as it could encourage buyside firms to over-trade in order to gain larger share of research budget, rather than considering value for money.

Under MiFID II, the rules on inducements and paying for Continue reading

Getting to grips with MiFID II


Following the release last month of the Draft Regulatory Technical Standards (RTS) and Regulatory technical and implementing standards Annex 1 for MiFID II / MIFIR firms and their regulatory experts and consultants will by now be deep into the technical details.

Whilst some firms have voiced concern that they will struggle to implement the technology changes required, others are already looking to turn regulatory compliance into competitive advantage. The clock’s ticking towards MiFID II implementation on 3rd Jan 2017, and the FCA has indicated that new authorisation could take up to six months, so really no time to lose.

As can be seen from the impact assessment heat-map below Continue reading