Global FX market growth has been slowed by regulation and lack of Prime Brokers – says ADS Securities
(firmenpresse) - An estimated US$1.3 trillion credit gap needs to be filled
London, United Kingdom, 19th May 2016 – Tighter regulation, reduced risk appetite and the decline in the number of Prime Brokers (PBs) are affecting growth in the global FX market, according to ADS Securities. An estimated 25 per cent drop in available FX trading lines is leading to wider spreads, higher prices and increased foreign currency exposure for many participants.
In 2013 the average daily volume in the global market FX market was US$5.3 trillion (Bank of International Settlements – Triennial Survey), and estimates were for the market to reach US$6.5 trillion by September this year. But as a result of the changed market dynamics, and with the scaling back of Foreign Exchange Prime Broker (FXPB) services, there may be little or no increase from the 2013 figures, if not a reduction.
Marco Baggioli, COO, at ADS Securities London, commented: “A daily global FX industry credit gap potentially affecting as much as US$1.3 trillion in daily volume is extremely significant and is changing the overall balance of the market. The lack of credit will lead to much wider spreads and increased pricing for all, from banks, to hedge funds, international businesses and all FX traders and, at the moment, no one is facing up to the problem.”
He believes it is time for the FX industry to act and take on some of the risk that bank PBs are no longer willing to accept, helping to close the credit gap. He sees an important role for strong, technologically astute brokerages to actively step in and ensure that a range of FX firms can access the credit lines they are looking for. “I see a need for prime-of-prime services that are a true reflection of a direct prime brokerage relationship, with direct access to liquidity backed by strong capital and credit relationships,” he added.
James Watson, Managing Director, ADS Securities London Limited, is clear about what needs to happen: “It is our opinion that well-capitalised FX brokerages need to step-up and support the institutional FX market by addressing the market gap in credit intermediation facilities. A credit gap potentially affecting US$1.3 trillion in FX turnover cannot be overlooked, and will cause issues through all sectors of Financial Services. If brokerages do not respond then the gap will continue to grow and all traders will be faced with a much less efficient market.”
This credit gap has been several years in the making. Following the global financial crisis of 2008 and the subsequent Swiss National Bank event in January 2015, a number of tier 1 banks have taken a more conservative approach to risk. Around the same time, the tightening of regulations – including demands for higher capital requirements – saw these same banks moving away from capital intensive activities. Ultimately, many banks have either stopped, or dramatically scaled back, their FX-only prime brokerage services.
Mr Baggioli continued: “Two years ago a broker with US$5million capital might have been able to access a PB, but the capital they must now have has gone up to as high as US$50-75 million – so many cannot get the credit lines they need. Some smaller firms may be able to trade bilaterally with each liquidity provider and post margin accordingly, but this approach has a lot of limitations, including netting of risk and margin requirements. The situation is as dire for start-up Hedge Funds or those whose assets under management do not make the cut with the FX PBs.”
“If the market is going to maintain a mix of balanced FX flows and competitive pricing, then it must develop new solutions. The FX industry has seen many years of highly profitable growth which has allowed investment in technology, so the systems and knowledge are in place to allow true downstream credit intermediation. Leading brokerages should have a role sitting between clients and their own PBs, providing access and sharing their credit lines. Clients will need to pay for this, but at least they will be trading and stay in business; savings need be found elsewhere in their FX value chain,” he concluded.
In the last two years the number of FXPBs has been reduced to six major players, with six others dropping the service. The remaining FXPBs are also becoming more risk averse and profitability driven and will typically only take on those clients with the strongest balance sheets.
Themen in dieser Pressemitteilung:
Unternehmensinformation / Kurzprofil:
ADS Securities is an Abu Dhabi based and owned international financial services company, dedicated to providing the highest quality investment opportunities for institutional, private and retail clients. With regional offices in London and Hong Kong it offers unique wealth management, asset management, capital market and trading services delivered by market experts. It has made a significant investment into proprietary multi-asset trading technology which is central to its ability to access liquidity and assets, as well as delivering the highest quality products and services. Investment has also been made into people with the development of experienced, highly qualified teams with diverse backgrounds committed to a vision of becoming a leader in global business. Through organic growth, acquisition and strategic partnerships, ADS Securities has created a financial services firm which offers international knowledge, expertise and standards, but with the regional sensitivity and cultural identity of Abu Dhabi. ADS Securities is regulated by the Central bank of the UAE, the FCA in the UK and the SFC in Hong Kong. For more information please go to www.ads-securities.com
Tony Cross, Director, Monk Communications
Mob: +44 (0) 7973 284 749
Email: tony(at)monkcommunications.com
Stephen Davie, Communications Director, ADS Securities
Tel: +971 2 654 7663
Mob: +971 56 6852 878
Email: sgd.mkt(at)ads-securities.com
Datum: 19.05.2016 - 06:23 Uhr
Sprache: Deutsch
News-ID 1436176
Anzahl Zeichen: 4543
contact information:
Contact person: Fran Cator
Town:
Lincoln
Phone: 01522 883640
Kategorie:
Financial Services & Insurance
Typ of Press Release: bitte
type of sending: Veröffentlichung
Date of sending:
Anmerkungen:
Diese Pressemitteilung wurde bisher 542 mal aufgerufen.
Die Pressemitteilung mit dem Titel:
"Global FX market growth has been slowed by regulation and lack of Prime Brokers – says ADS Securities
"
steht unter der journalistisch-redaktionellen Verantwortung von
RealWire (Nachricht senden)
Beachten Sie bitte die weiteren Informationen zum Haftungsauschluß (gemäß TMG - TeleMedianGesetz) und dem Datenschutz (gemäß der DSGVO).
