Burberry continues to set the standard

Chatsworth stopped by Burberry’s take over of the Old Sessions House, soon to be London’s hottest new club and restaurant venue, near our office in Clerkenwell. 

The British brand is hosting a photographic exhibition curated by president and chief creative officer Christopher Bailey, entitled ‘Here We Are’, with the accumulated work of over 30 social and documentary photographers who made their aesthetic mark on the 20th Century.

Burberry remains a real case study for smart integrated brand communications, using digital channels, event space and marketing to remarkable effect. 

Marketing by association and advocacy is a clever technique and Burberry use this to the max by curating both new and established art and music to reinforce their own creative work. 

As they say, it’s the company you keep. Great brand, great reputation.

R3 hosts CordaCon in London’s Square Mile

R3 CordaCon is the fintech event creating the most FOMO this week. The event in London’s Square Mile is massively oversubscribed due to demand.

R3 has brought the largest single group of blockchain-inspired technologists and business leaders together in one forum.

They’re coming together in discussions, panels and demonstrations exploring their work on Corda and have focused on a range of topics from technology design to commercial applications and regulatory policy issues.

R3 is also hosting a members’ forum with developers and technologists from global and regional banks, insurers and other financial services institutions

With over 100 members and dozens of projects currently underway, R3 has gathered significant momentum over the past two years. Building the new infrastructure for the financial services industry is a major undertaking, but R3 is powering full steam ahead with the industry firmly behind it.

Previse secures backing to end late B2B payments with the help of AI

Small businesses are the backbone of the UK economy, generating some 50% of private sector turnover and employing three out of five private sector workers.

However, these businesses are held back by late payments from their large corporate clients. With 60% of SMEs paid late by corporates, businesses are left strapped for cash to meet their own payment obligations, such as wages, stock and rent. This cash flow crisis forces 50,000 UK companies a year to go to the wall. 

Banks play a role in easing the problem, offering larger suppliers short-term financing or buying the invoices directly from suppliers for a substantial discount, a practice known as factoring. Both these solutions are expensive for the supplier, however, which pushes up prices for the whole payments chain. In addition, given the fragmented and high-risk nature of the SME credit market, only the largest suppliers are able to secure credit.

This means that, according to the world bank, there is $2.4 trillion in unmet demand for financing from SMEs globally.

Enter Previse. The company, which this week announced the successful completion of a £2 million seed round, is harnessing the power of artificial intelligence (AI) technology to allow banks to meet the financing needs of SME suppliers in a scalable and low-risk way.

Previse uses advanced AI and hundreds of millions of data points to score the likelihood that a corporate buyer will be able to pay a supplier’s invoice. This score is then provided to banks and other funders who use that information to instantly pay the SME on behalf of the large corporate. The supplier receives their money the day they issue their invoice, giving them complete cash flow confidence.

The effect is that “instant, frictionless and efficient payments become the new standard for B2B payments,” according to Paul Christensen, co-founder and CEO of Previse.

The rest of the payments chain benefits as well. By offering such a service, buyers can negotiate a discount on their purchasing costs and banks can reach much deeper into the SME credit market without blowing their risk exposure. The net effect could be a several billion-pound boost to the UK economy every year.

To find out more about Previse seed funding please click here

Chatsworth is proud to support London Tech Week and Sadiq Khan’s vision for ‘the world’s leading smart city’

Chatsworth is proud to support London Tech Week and the vision to create the world’s leading smart city.

With Brexit and an uncertain outcome in the UK election this month, a cloud has continued to loom large over the UK economy. Frankly, we’re a little over all the doom and gloom so we’re happy to report that one industry that continues to thrive in the midst of uncertainty is the UK’s financial technology (fintech) sector.

London remains Europe’s leading city for foreign direct investment into the technology sector, attracting significantly more investment projects than any other European city, in each year during the last decade.

The Chatsworth team knows “a bit” about FinTech. We’ve specialised in it for over a decade and it remains our pinpoint focus.

We set up in London before expanding across the pond and we’re delighted that international investors rank London as a leading global tech hub, with London featuring in the three highest ranked cities with the potential to produce the next global tech giant.[1]

This week, the sector received a further boost of confidence from Sadiq Khan, Mayor of London, who launched London Tech Week, a week-long celebration promoting London’s role at the epicenter of innovation and technology.

This year’s festival is expected to be bigger than ever before and attract more than 50,000 visitors to hundreds of events across London. Artificial Intelligence (AI), connected vehicles, and regtech are just some of the events on the agenda, alongside a range of networking opportunities. The full program of events for the week is available here.

Speaking at the annual event, the Mayor outlined his vision for London to maintain its influence and expertise, and become “the world’s leading smart city”.

He also reassured the global tech community that London remains open to talent and investment from all over the world, pledging to do everything in his power to safeguard London’s global competitiveness and status as a leader in innovation…

Since its launch in 2014 London Tech Week has included more than 700 events and has welcomed delegations from around the world. Congrats once more to all involved.

Chatsworth is proud to support Clerkenwell Design Week – 23–25 May

This week sees the best of London’s design crowd descend on our hood for Clerkenwell Design Week.

This is a world-class showcase of the leading UK and international designers, brands and companies across showroom events, exhibitions, live talks, workshops and installations.

Chatsworth is showcasing the best of our design for business. We help connect financial technology brands with audiences and users through our digital design and user experience.

Contact us for more information and don’t forget to register for the event.

Flying the nest – twenty years of independence for The Old Lady

Twenty years ago this month, buoyed by a historic landslide victory in the 1997 general election, Chancellor of the Exchequer Gordon Brown made the surprise announcement: the Bank of England (BoE), affectionately referred to as The Old Lady, would become independent for the first time in its history.

The plans for independence were made in great secrecy. According to Mervyn King, the BoE governor at the time, Eddie George, was only told about it the day before Brown announced the decision. However, the move was hailed by both the BoE and financial markets, strengthening its credibility and creating more stability around monetary policy decisions.

Coping with crisis

However, perhaps the most volatile period over the past twenty years was the 2008 financial crisis and the subsequent fallout. This transformed the Bank’s way of working both internally and in its relationship with the politicians, financial markets and other stakeholders.

Some accused the Bank of being slow to respond to the crisis, and Katie Barker, a member of the BoE’s Monetary Policy Committee for nine years, described a “terrible group think” which prevented it from seeing the crisis emerging.

However, the Old Lady’s response to the crisis proved to be defining. A major quantitative easing (QE) programme and a prolonged period of record low interest rates have been the central pillars of the UK’s post-crisis recovery program. Many have since acknowledged have played in underpinning stability and economic growth.

Although there have been changes in personnel and processes in subsequent years, overall, the Bank emerged from the crisis with its reputation enhanced. Post-crisis reforms have further centralised its power, including returning responsibility for prudential oversight to the bank from the now-disbanded Financial Services Authority.

Looking forward

With the arrival of its new governor, Mark Carney, from Canada, the Bank has also improved its working relationship with government and strengthened internal management practices.

This is good news, as major challenges lie ahead for Mr Carney and the central bank. He has already come under unprecedented criticism from some Parliamentarians for his outspoken warnings in the build-up to the EU referendum in 2016.

Managing the markets and the economy as Britain exits the EU will require a careful touch and Mr Carney will no-doubt face high levels of scrutiny from both the press and politicians.

In addition, the Bank is not immune to a growing scepticism in the political class around the whole notion of central bank independence. The response of banks to the financial crisis, particularly QE, has become a political issue in the US, Europe and now the UK Prime Minister Theresa May has argued that it has meant “people with assets have got richer” while “people without them have suffered”.

Given its enhanced role in overseeing banking and monetary policy, some, such as former Strictly Come Dancing star Ed Balls, believe that the blame for the next financial crisis will be placed, fairly or not, squarely at the door of the Bank of England.

Despite the ups and downs, the Bank has helped to successfully steer the UK economy since flying the nest. It is now also transforming itself into a global leader in fintech regulation, setting up a fintech accelerator last year. Recently the bank also launched a plan to de-risk Sterling payments with its blueprint for a new real-time gross settlement system to improve sterling payment.

With careful management and this continued focus on evolving with the rapidly changing financial services market, we look forward to another twenty years of an independent central Bank.

Sterling reigns over euro amongst central banks

Central banks view the UK as a safer prospect for investing their currency reserves, despite the uncertainty created by the Brexit vote and Article 50.

That was the key revelation from a survey of reserve managers at 80 central banks, conducted by trade publication Central Banking and HSBC.

According to the FT, concerns over political instability, weak growth and negative interest rates mean reserve managers consider sterling as a long-term, stable alternative to the euro.

This is significant for several reasons. Firstly, reserve managers at 80 central banks are responsible for investments worth more than GBP 5.1 trillion and are tasked with ensuring the value of their domestic currency is maintained. Their decisions will be closely followed by currency traders and investment managers around the world. 

Secondly, sterling’s post referendum plunge was widely noted last June. However, it gained against the US dollar during the first quarter of 2017 – the first quarterly gain since June 2015 – and the bullish bets from central banks suggests a further upward correction is on the horizon. 71 per cent of respondents said the attractiveness of the pound was unchanged in the longer term.

The prospect of an imminent resurgence in sterling is backed by analysts at leading investment banks, which predicted an unwinding of near-record bets against sterling if a constructive tone was adopted by the UK and Brussels continued over Brexit negotiations. Japanese bank Nomura in particular, believes the pound is undervalued against the dollar by as much as 25 per cent.

Thirdly, the survey’s findings highlight concerns over the stability of the monetary union, which was identified as the greatest fear for 2017 for reserve managers. Some central banks have reportedly cut their entire exposure to the euro, unprecedented for the world’s second most popular currency, while others have reduced their holdings of investments denominated in euros to the bare minimum.

The survey found that the ECB’s negative interest rate policy was also key factor causing bearishness on the euro. The policy was designed to boost growth across the Eurozone but has impacted profits at banks and financial institutions across the Eurozone.

While these conclusions give reasons for both optimism and trepidation – it’s a matter of perspective, after all – they highlight the fluid and interlinked nature of politics and the currency markets.

More than GBP 3 trillion of currencies are traded every single day around the world, and its impact stretches far beyond the trading floors of the largest international banks. 

Currency movements affect everything from individual pensions to the cost of daily household goods, and with politicians on both sides of The Channel spinning dealing with multiple, complex challenges, currency markets will listen intently to their every word. 

Brace yourself for a period of excitement, nervousness and volatility over the next 24 months.

London’s post-Brexit future as a financial hub

UK Prime Minister Theresa May finally triggered the formal process for Britain leaving the European Union (EU) on March 29.

While the EU referendum and a post-Brexit scenario may have been something of a blow to confidence in the City, it still has plenty going for it as a financial hub. This year’s Global Financial Centres Index, an international ranking of the world’s leading financial centres, placed London top of the pile.

“London’s rating has been influenced by not knowing what will happen after the UK’s departure [from the EU],” Mark Yeandle, associate director of Z/Yen and author of the report, told The Financial Times. Despite this, London remains top of the list and, over the period which the report tracks, has even recovered some ranking points.

London also remains the world’s biggest FX market by a huge margin, according to the latest BIS Triennial report. While Brexit may result in some jobs being relocated, the industry still believes London will remain front and centre and a key financial hub.

One of the key factors which will insulate London’s FX market is its concentration of trading infrastructure and activity. “When trading becomes concentrated in a particular region and is supported by a comprehensive legal and regulatory environment it develops natural strengths that enable that particular market to function well.” says Dan Marcus, CEO of ParFX, talking to Finance Magnates. “By leaving that pool of liquidity, a firm could disadvantage themselves and their clients.”

This means that, far from vacating the city, many businesses are investing further in London’s future.

Algorithmic trading technology provider Pragma is one such company, with the New York-based firm expanding its equities and FX business to London. “Our investment in the data center at Equinix’s LD6 site offers Pragma360 clients access to state-of-the art technology and the largest ecosystem for foreign exchange trading globally,” says Pragma’s Chief Business Officer, Curtis Pfeiffer.

“Despite the uncertainty caused by Brexit, we are moving forward with this large capital expenditure because London, as the largest FX trading centre in the world, hosts the largest datacentre ecosystem for low-latency FX trading applications and we do not see that changing any time soon,” he explains.

While nothing in the negotiations has been determined at this early stage, the City will also weigh up the potential challenges of Brexit.

Continued access to the European single market through financial passporting and the ability to attract skilled technology professionals from across the EU to work in London top the list for many institutions.

“77% of my staff in London were born outside the UK. We need those people. People are very mobile. I just worry that tough negotiations will send the wrong signal.” Michael Kent, CEO of remittance service Azimo, told Financial News.

In addition, J.P. Morgan has reportedly spent the last nine months weighing up various EU cities as a potential new continental home for their operations, according to The Wall Street Journal.

Looking beyond the headlines, however, the picture is more nuanced. Most of the relocation plans announced over the past few months involve relatively small numbers of staff. For many banks and financial institutions this may be a hedging exercise rather than a wholesale exodus.

Going forward, the UK government is determined to ensure London remains a central part of the international financial landscape, and it’s worth remembering London has a number of strategic advantages which mean it is likely to continue to be the city of choice. It uses the global language of business, English; it is situated in the perfect timezone between Asia and America; and has a legal system that is world-renowned for clarity and reliability.

None of this will change; in fact, it will continue to ensure London remains open and attractive to business.

London in the grip of normality

For all our friends and colleagues outside of the capital, beyond the square mile of the city and over the seas, London feels absolutely, completely, normal today.

People staring grimly at their phones, no conversation on the tube. That’s actually London on a regular work day.

Yesterday, the Prime Minister said: ‘Tomorrow morning, parliament will meet as normal. We will come together as normal. And Londoners and others around the world will get up and go about their day as normal.’

Mrs May was right.

This city has seen countless, tragic and pathetic attempts to derail our way of life. They will never succeed.

Our thanks, love and gratitude to the people who work for and with us, to keep us safe. Our thoughts are with those who were hurt or who lost someone yesterday.

Now we go back to work.

Algo trading on the rise as Pragma establishes European presence

The decision by Pragma to set up a base in London shows how the UK’s capital remains the natural hub for algorithmic currency trading despite the UK’s looming exit from the European Union.

While the debate about the future of London in a post-Brexit environment continues to rage on, there are many who continue to recognise the role of London at the centre of the USD5 trillion currency market.

Algorithmic trading in particular continues to rise in popularity. A report from Greenwich Associates found that the proportion of volume-weighted FX trading executed algorithmically has increased two and a half times in the past three years.

This trend was further highlighted by Pragma Securities, the multi-asset class provider of algorithmic solutions, which established a new connectivity presence in London to service its growing international client base.

London currently accounts for more than a third of all currency trading activity globally, according to the BIS. In a news article in FX Week, David Mechner, CEO of Pragma, expressed confidence in London and its role at the centre of European and international financial markets.

“Equinix’s LD6 site offers Pragma360 clients access to state-of-the art technology and the largest ecosystem for foreign exchange trading globally.

“The banks we service need state-of-the-art trading capabilities for their traders, and buy-side and corporate clients, making LD6 a natural fit.”

Pragma is not alone in its bullishness on London’s future, and it is clear that maintaining a data centre presence remains crucial to an institution’s trading operations, particularly for FX trading. The Financial Times recently reported on Dutch data centre operator Interxion’s £30m investment in its site in London’s Brick Lane.

Curtis Pfeiffer, Chief Business Officer at Pragma, also highlighted the benefits of proximity to London and risks of leaving London’s FX ecosystem.

“We are moving forward with this large capital expenditure because London, as the largest FX trading centre in the world, hosts the largest datacentre ecosystem for low-latency FX trading applications and we do not see that changing any time soon,” said Curtis.

“Institutions will be reluctant to leave the data centre ecosystem in London, which has increased in size significantly over the last 10 years as a result of a network effect – everyone wants their trading servers to be where everyone else’s are. By leaving that ecosystem, a firm could disadvantage themselves and their clients.”

Business as usual for London’s FX industry post-Brexit

No signs of exodus to other financial centres as FX recruitment holds firm.

Following the UK’s vote to leave the EU, European financial centres such as Paris and Frankfurt prepared to roll out the red carpet for London’s financial institutions. But this may be more difficult than initially anticipated.

Red tape regulations, heavier personal tax regimes, governmental issues and different social norms means there is little appetite for London’s foreign exchange (FX) trading institutions to move jobs to Europe en mass, according to recruiters keeping close tabs on London’s financial district.

Despite the Brexit vote, and repeated reports about banks accelerating plans to move jobs from the UK, European cities are struggling to match the pull factors that London offers.

London has long been at the heart of the international currency markets, accounting for more than 40% of FX turnover, according to the Bank for International Settlements. With its advanced infrastructure, access to human capital, a strong legal and regulatory system and a time zone that allows London-based traders to service customers all over the world, it has not only maintained its dominance but also attracted a host of emerging fintech companies to form one of the largest technology and innovation hubs in the world – further strengthening the City’s dominance.

All of this means the number of suitable alternatives to London is limited.

In an article for Euromoney, Andrew Kitchen, internal audit manager at recruitment consultancy Morgan McKinley, says there has been no increase in the number of people from the leading banks looking to leave the UK since the EU referendum vote.

This may be because transferring large numbers of FX staff to France in particular will not be a straightforward process, adds Raoul Ruparel, co-director of Open Europe. “Culturally and socially, France has taken a different approach to the UK in relation to this type of business in recent years,” he says. “It remains to be seen whether they have the appetite to offer tax or regulatory incentives.”

French employment and personal tax regimes are also likely to be a factor that counts against Paris, according to James Coiley, a partner at law firm Ashurst. “Making overtures to FX banks and traders to relocate to Paris may not play well with supporters of the socialist French government.”

However, the uncertainty seems to have stopped some banks from transferring jobs from mainland Europe to London, according to Kitchen. “What we are seeing is that several candidates based in Europe who had hitherto been looking to relocate to London are now staying put. This is in part due to the level of uncertainty around future Brexit implications, but also the current weak value of the pound,” he warns.

So while the outlook for 2017 remains unclear, London’s FX industry continues to remain resilient in the face of uncertainty and there has yet to be any knee-jerk reactions that disrupt the status quo on either side. Although it is still early days, what is clear is that fears over London losing its FX crown remain largely unfounded for now.

The City now looks to politicians with bated breath.

London’s leading position as a USD 2.2 trillion hub for FX trading would be harmed by a Brexit, according to poll of currency market professionals

London’s position as the world’s main currency trading centre would be threatened by a British exit from the European Union, with Frankfurt, Paris, New York and Dublin likely to be the main beneficiaries, according to a survey of foreign exchange (FX) market professionals.

As reported in Bloomberg and Reuters, the research team at Chatsworth Communications polled 12,000 members of the ACI Financial Markets Association, the largest global trade body representing the international currency markets, for their personal views ahead of the UK Referendum vote on 23 June.

Key findings:

  • Two-thirds (65%) of respondents believe a UK vote to leave the EU would negatively affect London’s position as the world’s largest FX trading centre, while 13% believe a Brexit would have a positive impact.
  • Of those concerned about the negative impact on London, more than 70% identified Frankfurt as the trading centre most likely to benefit from a Brexit, followed by Paris (49%), New York (40%) and Dublin (28%).
  • 80% of all respondents believe the UK will vote to remain in the EU.

London’s dominance of the foreign exchange market has grown exponentially as the size of the market expanded, and is, by far, the largest and most established centre for currency trading. Nearly 41% of global trading goes through London, more than double the market share of New York, according to data from the Bank for International Settlements (BIS)*.

Currency trading increased globally to an average USD 5.3 trillion (GBP 3.8 trillion) per day in 2013. The vast majority (75%) occurred in five jurisdictions: London (41%), New York (19%), Singapore (5.7%), Japan (5.6%) and Hong Kong (4.1%).*

 

Detailed findings:

A UK vote to leave the EU will…

  • Positively affect London’s position as the world’s largest FX trading centre: 13%.
  • Negatively affect London’s position as the world’s largest FX trading centre: 65%.
  • Have no effect: 22%.

How do you think the UK public will vote?

  • The UK will vote to remain in the EU: 80%.
  • The UK will vote to leave the EU: 20%.

Which global trading centres do you think will benefit the most if the UK votes to leave (NOTE: answered only by respondents who believe a Brexit will have a negative impact on London)?

  • Frankfurt: 71%.
  • Paris: 49%.
  • New York: 40%.
  • Dublin: 28%.
  • Zurich: 14%.
  • Hong Kong: 8%.
  • Singapore: 7%.
  • Geneva: 7%
  • Dubai: 4%.
  • Tokyo: 4%.

How long have you worked in the FX industry?

  • Less than one year: 0%.
  • 1-2 years: 9%.
  • 3-5 years: 10%.
  • 6-10 years: 16%.
  • 11-15 years: 17%.
  • 16-20 years: 18%.
  • More than 20 years: 30%.

Survival of the biggest: A new era of mega-exchanges on the horizon?

The prospect of a merger between exchange powerhouses, the London Stock Exchange Group (LSEG) and Deutsche Börse could usher in an era of mega-exchanges, where a handful of providers dominate equity, derivative, fixed income, indices and clearing markets in specific geographies – making them a one stop shop for the entire trade cycle.

Yet the road to that reality is certainly a long one. The unravelling of negotiations between these two trading behemoths to secure a deal in 2000 and again in 2005, demonstrates all to clearly the challenge that lies ahead.

Moreover, possible legal hurdles put in place by anti-trust authorities, combined with political and economic uncertainty surrounding a British exit from the European Union, could yet prove terminal.

The rationale behind this potential corporate marriage is clear. In a statement issued by the LSEG announcing the talks, the Group pointed to “the prospect of enhanced growth, significant customer benefits including cross-margining between listed and OTC derivatives clearing.” The move, which would allow both firms to pool capital, resources and expertise to grow market share and cut operational costs is also consistent with the LSE’s long-term strategy under the leadership of CEO, Xavier Rolet.

Rolet’s commitment to strengthen the Group by completing a string of acquisitions to diversify its offering in the derivatives, indices and clearing market has paid dividends. The purchase of indices providers Russell Group and FTSE in quick succession, as well as a majority stake in LCH Clearnet, one of the largest interdealer clearing houses, has affirmed the group’s position in Europe as a leading provider of trade execution, clearing and data related services.

This strategy has led to a dramatic rise in market capitalisation by as much as fivefold and also transformed the group from being preyed upon by rival firms, to a predator seeking to grow market share, according to a recent article on the proposed deal in the Financial Times.

However, US exchanges are increasingly seeking to secure a global, rather than continental footprint with a move into European Markets. BATS Global Markets, a US operator, now runs the biggest stock exchange in Europe by market share – whilst CME, the Chicago-based group, launched in European markets in 2012 with a multi-asset derivatives offering spanning trading and clearing services – posing a direct challenge to incumbent operators.

Against this backdrop, it is clear to see why these two institutions are seeking to pool capital, technology and people to compete directly with global exchanges, particularly from the US. It is well known that this drive towards exchange consolidation is likely to result in a small number of major operators, reducing market fragmentation, something noted by Rolet in 2011.

“In five years there’ll be three, four international exchange groups with global distribution capabilities,” he said in an article in the Telegraph.

But what about end-users?

Whilst the rationale behind a potential merger has commercial objectives, it is also likely to deliver cost synergies, particularly for core customers such as large investment banks and asset managers.

For example, the introduction of new regulation designed to implement greater risk controls on global derivatives markets has placed steeper margin requirements on banks – creating a glut of capital warehoused in major clearing providers such as LCH Clearnet and Eurex Clearing. Whilst the LSEG statement specifically noted that both firms would remain as separate entities, a merger could allow banks with portfolios in each CCP to reduce net margins and free up capital that can be used more profitably elsewhere.

Whilst a deal will deliver greater operational efficiencies to LSEG, Deutsche Börse and their respective customers, it is likely to trigger further consolidation as smaller exchanges rush to pool resources and as a result, introduce a new era dominated by a handful of major global players.