- What do you see as the key factors shaping the global FX industry today?
Low volatility in all markets is having a big affect this year. When a Scottish led 150 pip move in GBP is considered a big move – things are quiet. Low volatility means budgets are down, projects go on hold, people get laid off. The question is how long will it go on for ? Once interest rates return there’s always another geo political event to kick things off again.
Market opportunities & challenges
- Where do you see the key business opportunities in the FX market for firms like yours (and your clients) over the next 1 year, 2 years, 5 years?
Our focus is entirely on RMB and EMFX – so naturally we seem them becoming more and more relevant as well as deeper liquidity pools which in turn attract further activity. These countries represent 50% of global trade but only 19% of payments – that’s likely to change. I do also think that retail payments services like Currency Cloud, TransferWise and CurrencyFair are going to get bigger
- What do you see as the biggest challenges over the same periods?
I see big on going challenges for the central banks of EM nations and the formation of the BRICS bank is a great idea – but certainly a very difficult beast for them to manage.
- How do you see the emerging markets FX landscape evolving over the next few years?
RMB will become a household word. Just like the HSBC ads at the airport – trade will go East East and Russia – China – India will become even more relevant. Understanding Chinese is going to be important very soon – speaking it might take longer.
Technology Innovations and Trends
- What do you think has been (or will be) the most disruptive technology to hit the FX trading industry?
The rise of the non bank market maker. Banks have withdrawn from the large ECN’s and internalise far more as a result, speeding the growth of the non bank market maker even further. Its technology led change but its also a new reality.
- Are there any FX technology products or solutions that have particularly impressed you? Why?
I’m a big fan of the relatively recent providers carving out their part of the marketplace – FXSpotstream, order lexapro cheap Digital Vega, ParFX, LMAX and MarketFactory. All a good example of how the market evolves.
Business Models and Market Participants
- What changes have you seen – or do you expect to see – in the business models of banks, IDBs, trading venues and solution providers with the growth of electronic trading in FX?
The game is up. A number of people working in banks know that their job will eventually be replaced by an eTrading service of some sort provided by a vendor.Its worse for the brokers. 45% of people believe their job will be replaced by a robot and 80% of robots agree with them.
- Are you seeing a growth – or a reduction – in any particular class of market participant? To what would you attribute that?
Retail is down this year – in a range bound market the customers are making too much money for some brokers. We may see the next BIS survey show a reduction in daily turnover as a result – but that will be replaced by more RMB trading activity.
- What is your view of the current regulatory environment with regard to FX? Over-regulated? Under-regulated?
I’m a big fan of regulation – its created opportunity for a number of new entrants including ourselves. The FCA Project Innovate is a new directive to help streamline for new FinTech and I think its going very well.
- Which are the main areas that regulators should be focusing on?
What they’ve always done – protecting the health of the market and the man in the street . Alas there is a big disconnect between US, UK, European and Asian regulators – which in itself creates further opportunity – but it would be better if you could passport between them a bit easier.
- Which upcoming regulations will have most impact on your business? And on the global FX market overall?
For us its what’s going to happen with clearing for eNDF’s – what rules will be put in place under ESMA and when ? For the market overall – I think we will see Dodd Frank evolve in some way. If a US Pension is getting a worse price as a result of having to trade on SEF – then someone on capital hill is going to get on their soapbox about that.