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

FX Platforms Nov15: Reuters FX spot vols down -13.5% in Nov (lowest since Jan-13)


Thomson Reuters has released Nov15  FX vols, which show a fourth monthly drop, with FX Spot vols down -13.5% at $90bn/day, the lowest reported vols for Reuters spot FX since Reuters started releasing their new format of volumes in Jan 13, whilst overall Reuters FX volumes down -10.5% at $316bn/day to the lowest level since Nov 13.

This compares to EBS, who reported vols down -9.9% at $75.5bn/day (lowest since the $70.6bn/day reported in Jul 14), although The CME faired better with the smallest fall, down -3.2% at $89.1bn/day (lowest since Aug 14).

1st tier platform vols Nov 15Table showing Top Tier platforms: Reuters, EBS and CME Futures vols for Nov 2015

If we look closer at Continue reading

EBS report near 10% fall in FX vols in Nov 15


EBS one of the major platforms in the FX market, has released weak Nov FX vols, which at $75.5bn/day are down nearly -10% on the $83.6bn/day reported in Oct, and a huge -38.6% down on the $123bn/day seen in Nov 14, and are now at the lowest levels since Jul 14 ($70.6bn/day).

EBS vols

EBS Monthly Volumes

Meanwhile, the CME futures market showed a much smaller decline with Nov vols of $89.1bn/day down a modest -3.2% on Oct 15, and off -23.3% compared to Nov 14, and the lowest since Aug 14 ($83.6bn/day).

Next week Reuters reports their figures and then we can compare and contrast the major FX platforms, although being Nov, it looks like a typical year end slowdown at the moment.

FX 2nd tier platform vols Nov 15: Fastmatch & Hotspot vols down over 6% in Nov 15


 

Volumes continuing to decline with the approach year-end, and in terms of the second tier FX platforms, FastMatch vols fell -6.7% in Nov 15 to $8.4bn/day, following the +15.4% rise in October, although still down -33.2% compared to the Nov 14 level $12.6bn/day. Meanwhile Hotspot saw the third consecutive monthly fall, with vols down -6.3% to $22.4bn/day in Nov 15 (following the -8.6% fall in Oct), and down -31.7% compared to Nov 14.

2nd tier platform vols Nov 15

Table showing Second Tier platforms: Hotspot, Fastmatch vols for Nov 2015

The charts below show 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

BGC sells Trayport to ICE exchange for $650m


Back in Feb 2015, BGC the interdealer broker (IDB), bought rival GFI for $778m. The transaction included GFI’s FX Option platform Fenics as well as commodity and energy platform Trayport. Although Fenics was strategic to the transaction, BGC had talked about selling Trayport.

Today, BGC announced that ICE exchange, who last month bought IDC for $5.2bn, would pay $650m for the Trayport platform.

According to Howard Lutnick, CEO of BGC;

“One of the main reasons that BGC pursued GFI was the expectation that the sale of Trayport would dramatically lower the price and risk involved with respect to purchasing the rest of GFI’s businesses. The proposed sale price represents $650m of the $750m that BGC will pay for all of GFI.

This translates into BGC paying approximately $100m for $640m of GFI’s remaining revenues, or a multiple of just 0.16 times sales. Therefore, we expect the GFI transaction to produce enormous value for BGC’s investors.”

Trayport: generates less than 3% of BGC revenues ($18.9m in Q3/15)
FENICS, generates $60.7m in Q3/15, or $250m of annualized revenues and approximately $105m of annualized pre-tax distributable earnings

So, selling Trayport and keeping Fenics was a no-brainer for BGC!

David Weiss over at Aite group, has a nice blog post that saves me trouble of comparing the two heavyweight IDB groups of Tullett+ICAP’s Global Broking Business vs BGC+GFI.

Full details of the BGC/ICE transaction here