Fintech investment red hot as London Tech Week kicks off

The UK tech sector raised more venture capital funding raised in the first five months of 2022 than in the whole of 2020. The £12.4 billion in funding raised so far this year puts the UK second only to the US in terms of start-up investment, and ahead of the likes of China, France and India.

The figures were released ahead of the start of London Tech Week– the annual celebration of the UK tech sector where industry and government figures discuss the future of the industry.

At Chatsworth, we’ve been focussing on the fintech sector for two decades and this investment is a massive vote of confidence in the skills, potential and need for technology.

Businesses and processes are digitising faster than ever, in part accelerated by Covid but also by the core market forces which demand safer, better, faster and cheaper.

London Tech Week also saw the launch of the review of the UK’s advanced computing capabilities by Chancellor Rishi Sunak who hailed the UK’s tech sector as an “incredible, thriving ecosystem”

High-performance computers and cloud capabilities were vital for powering technologies of the future, such as Artificial Intelligence, and will be critical for the UK’s productivity, prosperity and innovation.

The review will provide recommendations to form the basis of a long-term plan for the government’s approach. It will be led by world-leading AI researcher, Professor Zoubin Ghahramani, Professor of Information Engineering at the University of Cambridge and Vice President of Research at Google AI and Director of Google Brain.

When we founded Chatsworth, we took the strategic decision to become the first communications agency to focus all our energies on the fintech sector.

It was clear to us that digital transformation would be a key economic and business driver and that we would focus on that intersection of finance and technology.

We’re proud to have played our part in launching and building some of the most successful fintech brands of the past two decades and for the support of the UK’s exceptional fintech community.


Chatsworth was the first communications agency to focus on fintech. We’ve been building fintech reputations for 20 years, steering start-ups through launchgrowth and onto corporate action, and protecting and enhancing established infrastructures. Looking for intelligent, informed and connected fintech PR which delivers results and value? Get in touch and let us help build your reputation and tell your story.

Rising to the challenge of remote work culture

Being called to remote work ‘until further notice’ feels like a lifetime ago. Friday 13 March was Chatsworth’s first remote working day ahead of the National Lockdown on 23 March, and how important those extra few days were. To plan, prepare and begin the New Normal of remote working.

Culture is very important at Chatsworth, and employee engagement during remote working can be a challenge, but we were ready to embrace it. With many employees leaving London, we had our team split far and wide, from Suffolk to Brighton and even Cornwall, so it was undoubtedly important to continue regular social activities to ensure the team still felt a sense of companionship. And without hesitation, we reinvented our socials to fit our new-found requirements…

A Friday after-work trip to the pub became a remote Zoom call with a drink in hand. Our bi-monthly trip to BrewDog’s Pub Quiz became a remote quiz created by employees – who else remembers the magnitude of Zoom quizzes which flooded every household during lockdown?

I was particularly excited about the sunflower growing kits which were sent to each employee to plant and care for, with each week colleagues comparing growing notes or tips. Mine sadly only reached 116cm before being swept away by aggressive winds – thanks Storm Ellen…

A home-made hat competition encouraged employees to get creative. I dusted off my old childhood paintbrushes and paint collection and got to work. If you can remember Elmer the patchwork Elephant, then you can imagine my hat.

Other entries included: a cardboard Viking hat, a baseball cap stuck with Lotus Biscoff biscuits and even one made entirely from cut flowers from the garden! Our CEO had a hard time choosing the winner.

Our team has even celebrated a few milestones remotely. Helium balloons in the shape of numbers have arrived on employees’ doorsteps marking work-anniversaries, and birthdays have still been celebrated with cards, gift boxes, or flowers being sent home too. Although a remote celebration isn’t the same as a cake in the office, we are trying our best…

Our ‘remote clubs’ gave employees the option to join weekly discussions centered around the most recent film or book choice, almost as if we were all sat around the lunch tables in the office again.

Nothing can replace a true face to face social, but it has been encouraging to see participation in the remote socials, during what has been a challenging time. Some of these newfound socials may even keep their space on the Chatsworth social calendar well into the future…

As we enter Autumn and look ahead (maybe begrudgingly) to the cooler months, we face a new challenge.

Shortly after Chatsworth reopened its doors in August and welcomed employees back, albeit operating on a reduced capacity and in two different teams to remain COVID safe, the Government asked us to work from home again if you can.

What now feels like a very short six weeks of gradually regaining confidence moving around the city and revisiting favourite eateries on Exmouth Market, things came to a halt once more. Most disappointingly the message came just as we were getting back into the swing of things with Chatsworth’s life and culture. Enjoying lunch on the roof terrace, catching up with colleagues in one of our socially distanced breakout areas, or accidentally tripping into Gail’s Bakery each morning for a coffee and croissant, as I did. Now would be very easy to backtrack on our remote progress made, but I’m determined not to let that happen.

As we reintroduce what now feels a familiar style of working, it’s important to keep momentum on remote social activities so these naturally darker months don’t seem all too challenging. Our office remains open one day a week for our two teams who can optionally visit the office to work and collaborate, while the majority of our working days will be spent at home.

Film Club could become a staple over the next few months as wintery weather sets in. Especially with an abundance of seasonal options on Netflix surrounding Halloween, and dare I even mention the C-word…?!

Written by Bonnie Baker, PA & Office Manager at Chatsworth Communications


For more information about our culture and job vacancies, check out our careers page

 

A Q&A with our 2020 interns Guste, Juste and Marie

Internship

When Chatsworth transitioned to remote working in March 2020, it was a new experience for the whole team. Guste, Juste and Marie sat down to discuss their virtual internships and journey into Fintech PR.

What is a typical day like at Chatsworth?

Juste: Coming into such a specialised firm, with so much to learn, has meant that each day is different from the last. Of course, a routine of regular tasks does begin to develop as you become familiar with the role, the clients, and the industry – but even then, there’s a lot of diversity in terms of what’s going on over the course of the week or month. If you’re not drafting social media content, it might be a release or an article. If it’s neither, then you might be monitoring the news, drafting up or media lists, or collating reports – all across different clients.

The whole team was great at giving us a variety of tasks and projects to work on as we progressed through the internship, meaning that each day we had something new to try out.

How did you find starting the internship virtually?

Guste: It was definitely a different experience! Starting at the application process, to our first day, and all the way to today, the Chatsworth team has been helpful and supportive at every step. We felt a part of the team right from the start.

Starting my internship with Chatsworth virtually felt very seamless – as if this was already tried and tested long before we came along. You could hop on a call with anyone to have a quick chat or a briefing without a problem. There was also an active effort to establish whole team meetings, both social and professional, so we would always have a chance to hear about what’s going on other accounts and the whole company as well as get to know each other.

What is the culture like at Chatsworth?

Marie: Starting your career with a small firm is brilliant because you get a lot of support from the whole team as well as a lot of client exposure very early on. Being able to get stuck in with client work has helped me get up to speed with the industry really quickly and just wouldn’t be possible without such a tight-knit team.

I have a fantastic manager who is very supportive and always challenging me to go further. I also have a mentor, Isabel who was an intern last year and is now a Senior Account Executive at Chatsworth – she’s great at giving advice and is always on hand to answer any questions.

What is it like to work within Fintech?

Guste: While I didn’t have any fintech experience before I started, I had worked with start-ups in the past, and their enthusiasm and energy are what drew me to this internship. There was definitely a lot to learn, but my manager was always there to answer all of my questions and really helped get me up to speed very quickly. The rest of the team also team suggested lots of useful resources. A definite highlight included the frequent industry ‘quizzes’ I had to prepare for.

I’ve found fintech to be a very exciting industry to work in. You’re often at the forefront of the most exciting developments in finance and you get to see clients’ ideas come to life. It’s a great industry to start a career in!

What has been the biggest learning curve from transitioning from university to work?

Juste: Going from university to the office is quite a difference. For me, the biggest learning curve has been changing my writing style to suit public relations rather than academia, but it’s one that I enjoyed.

Chatsworth has a really good training programme with lots of useful tips which has helped me adapt to the writing style in PR. My manager has also been amazing in taking the time to sit down with me and go through my work – sometimes line by line, for us to get it just right.

What has been your favourite part of the internship?

Marie: My favourite part of the internship was learning about the finance and fintech fields. I had a background in PR before joining but no fintech experience. I had a few sessions with senior team members and their insight was invaluable in learning more about the industry.

Chatsworth really invests in training its interns. From very early on I had lots of support in developing my knowledge of the industry and building up my PR skill set. The internship gave me a great foundation and I very much rely on those skills in my work now as a Senior Account Executive. It’s been great to get stuck into such an exciting and fast-paced industry and see first-hand how fintech start-ups transform into industry leaders.


For more information about our culture and job vacancies, check out our careers page

 

Vale and Nanjing Iron & Steel complete transaction on Contour’s blockchain network

Nanjing |Iron & Steel

Today our client, Contour, announced a new transaction on its network between Vale and Nanjing Iron & Steel. This was the latest of a series of transactions between Nanjing and its various trading partners, indicating there’s a growing momentum and appetite for digital trade finance solutions within the industry.

The details

Vale, a newcomer to the network, acted as the seller of iron ore, and was supported by Standard Chartered Bank. In turn, Nanjing Iron & Steel was the buyer, and was supported by DBS Bank on their side of the trade. The transaction brought together both new and existing participants, showcasing Contour’s expansion as well as the value of their solution – as some corporates and banks are now conducting their second transaction on the network.

Carl Wegner, CEO at Contour, said:

“It’s clear from the recent transactions that there is an increasing demand for our offering to the market. With Vale joining as a new member of our network, we’re continuing to change the way international trade is conducted. Our growing presence in the iron ore market serves to highlight the need for an effective solution to traditional trade finance processes. We’ve always looked to develop a solution that is for the entire industry – not for a few participants. The continued support of our members such as DBS, Standard Chartered Bank and Nanjing Iron & Steel Group International Trade Co., Ltd. only serve to highlight how in demand this technology is and the benefits it provides.”

Digitising global trade

As lockdown eases across the world, and organisations adapt to social distancing and remote working, countless practises within international trade – such as the reliance on paper and manual processes – will come under greater scrutiny. Businesses will seek to find more innovative ways of managing trade finance documentation, and a digital solution – such as Contour’s – is rapidly becoming the more viable option.

To read the full story, click here: https://www.contour.network/post/vale-and-nanjing-complete-transaction-on-contour 


Chatsworth was the first communications agency to focus on fintech. We’ve been building fintech reputations for 20 years, steering start-ups through launchgrowth and onto corporate action, and protecting and enhancing established infrastructures.

Looking for intelligent, informed and connected fintech PR which delivers results and value?

Get in touch and let us help build your reputation and tell your story

Chatsworth reflects on International Women’s Day

This Sunday will mark the 109th International Women’s Day, an annual celebration of gender equality across the board, and an important discussion of the work to be done in achieving parity. As a woman working with clients in fintech, I thought I would take this opportunity to share my own thoughts and reflections on the specific challenges and successes in the sector.

Despite the huge progress we have seen since the very first International Women’s Day 109 years ago, the truth is that a fair amount of underlying, residual bias persists. For the finance sector – historically one of the most male-dominated of them all – it is particularly challenging to shift gender stereotypes.

Change is on its way, however. Fintech is the UK’s fastest growing sector and this growth has engendered discussions around the kind of talent we need to feed the industry, in order to remain competitive. We are brilliantly represented globally by Innovate Finance, led by CEO Charlotte Crosswell, who has done a fantastic job with her team to champion women in fintech.

We are now at a place where we recognise that the technology industry as a whole needs a good roster of female talent if we are to remain competitive in a digital world. I am encouraged to see this in the number of discussions, panels, and debates that call on young women to apply for jobs in tech.

From my own experience representing some of the most exciting fintech companies that are out there, I am proud to see that many of my clients have women in senior positions. More than this, many of those women are often in tech roles. R3, the global blockchain firm, has Dr. Katelyn Baker as its Principal Software Engineer. Mosaic Smart Data calls Diane Castelino its Data Science and Research Lead.  LiquidityEdge has Nichola Hunter at its helm. These examples are testament to fintech’s status as a growing sector that is fostering female talent.

On a personal level, I am lucky enough to work for a company that prides itself on gender equality and actively encourages a pipeline of female talent. Chatsworth Communications has a 50:50 gender balance and I am convinced this is absolutely crucial in creating our dynamic, talented workforce.

However, the conversation is far from over. The fact that International Women’s Day is still taking place is a testament to that. Fintech is no exception here. Across the industry, women make up just 29 per cent of the employee base and the inequality is even starker at a leadership level, with men holding 83 per cent of executive roles. Clearly, this needs to change.

The number of UK fintech firms is due to double by 2030, with thousands of new jobs set to be created across design, developing and marketing. If fintech represents the future, we need to make sure that future is equal.

Part of the problem remains the challenge of getting female students into the subjects that feed fintech. But it is changing. More female students are recognising that coding, advanced maths and computer engineering are pathways that are open to them. Today, there are dozens of organisations set up to encourage women to learn how to code. Some of our clients run these, too. There are more opportunities and networks at women’s disposal than ever.

I can’t think of a better way to close than to use a quote from Sheryl Sandberg from her book ‘Lean in’: ‘“In the future, there will be no female leaders. There will just be leaders.”

Until we get to that point, we need to keep talking.

Written by Catherine Day, Account Manager at Chatsworth Communications.


For more information about our culture and job vacancies, check out our careers page

 

 

Blockchain’s five ingredients of interoperability

“There’s also a very special case of cross-blockchain interoperability… the case where the networks at each end of the connection turn out to be running the same platform. Intrachain, if you like.”

Richard Brown is Chief Technology Officer at R3, the enterprise software company supported by hundreds of banks, technology firms, regulators, trade associations and professional services firms. His team builds Corda, the world’s most advanced enterprise blockchain platform. What he doesn’t know about blockchain technology isn’t worth knowing.

Richard has long argued that not all blockchain platforms are alike and that the promise of blockchain technology is real with solutions which can eliminate huge amounts of cost, redundancy, error and needless reconciliation across entire business ecosystems, as well as opening up previously hidden new revenue opportunities.

But not all blockchain platforms are alike: Only some designs will be architecturally suited to the challenge. In his latest thought piece for Forbes, Richard takes his original five ingredients for interoperability and expands them to some real-life, tangible examples including the home buying process.

Read the full article here. As a reminder, here Richard’s five ingredients of blockchain:

  • We need integration with existing systems
  • We need to be able to initiate transactions on other networks
  • We need to be able to transact interchain with solutions on other technologies
  • We need to be able to transact intrachain with solutions on different deployments of the same technology
  • And we need to reduce buyer’s remorse by making it easy to interchange one underlying platform for another

A Q&A with our 2019 interns Isabel, Max and Eleanor

Chatsworth interns,  Isabel, Max and Eleanor progressed to take on full time roles with the company. We sat down to talk with them about their journey into Fintech PR.

Tell us your Chatsworth story so far.

Isabel: “After graduating from university, I joined Chatsworth in July 2019 as an intern with a six-month contract. In September I was then offered a permanent contract and came on full time as an Assistant Account Executive. However, 2 weeks ago I was really pleased to be promoted to Account Executive.

“Prior to joining Chatsworth, I had minimal PR and fintech experience. However, seven months in, my confidence and knowledge has hugely increased thanks to the support and training from the rest of the team.

“As my first job after uni, Chatsworth has been a great introduction to the working world where I have been challenged but with constant support. Despite being one of the junior members of the team, I am still given great client exposure and work where I feel like I am making a real contribution to the accounts.”

What is a typical working day like at Chatsworth?  

Eleanor: “I can tell you that no one day is the same. We operate a variety of tasks spread across a number of clients, so we are always kept busy. Even when clients are quiet, we come up with innovative ways for optimum exposure to their key target audience. This could include nominating clients for awards, creating press releases off the back of company announcements or creating ads to promote their products.

“My supervisor keeps me on top of things, helping to prioritise work so I never feel overwhelmed.”

What were your preconceptions of the PR industry before starting at Chatsworth and have these now changed?  

Eleanor: “On the surface, you might assume PR is easy but there is so much that goes on behind the scenes. We have to develop the appropriate strategy and key messaging for clients and communicate this effectively to the right publications.

“The important part is keeping the ball rolling. We’re always on the lookout for opportunities to share client stories, meaning we have to maintain relationships with journalists and the clients themselves. After all, it’s about building a client’s reputation over time.”

How did you find the transition from university to working life?

Max: “Working life is very different from life at university. The hours are longer than those worked by the typical student and commuting is not to everyone’s taste. Despite this, I found my transition entirely painless and, after a few weeks, I didn’t give it a second thought.

“My transition was definitely eased by the way Chatsworth enabled me to grow and learn. Instead of chucking me in at the deep end, I was pushed to progress but never really found myself out of my depth. On the rare occasions I did, there was always someone ready to help.”

What is it like to work within the fintech sector?

Max: “Fintech encompasses such a broad range of businesses, using a diverse set of technology to solve problems I never knew existed; however, you will very quickly get to grips with it.

“The sector sees some of the most interesting developments in the financial world and presents the perpetual challenge of communicating intricate details with both clarity and precision.”

Tell us about the employee culture at Chatsworth?

Isabel: “Being a company with under 20 employees, there is a great sense of teamwork at Chatsworth, where your achievements are always noticed and acknowledged. Regardless of the varying levels of authority, there is no sense of superiority and I feel like I can go to anyone in the team for advice and guidance.

“Outside of work, we are a social team and regularly go to events such as pub quizzes, crazy golf and after work drinks. During work hours, we know when to get our heads down but also when to keep things light-hearted – such as with our office bake-off.”


For more information about our culture and job vacancies, check out our careers page

FX operations and credit: hampering liquidity, raising costs

The FX market currently looks like the ultimate mismatch. Front office processes have been transformed to accommodate the realities of electronic trading – operations and credit haven’t. This is acting as a drag on FX liquidity, as well as imposing an enormous cost burden: ~£20bn per year for the top global investment banks and buy-side institutions. Fortunately, as Anoushka Rayner, Global Head of Sales and Business Development at Cobalt explains, there is a simple and readily achievable remedy: centralised standardisation.

The FX market has a proven track record for acting on its own initiative to ensure that trading is always orderly and unnecessary risks are curtailed, with the creation of CLS an obvious example. There is now a pressing need for it to act in similar fashion to address the issues of post-trade processing and credit management.

Operational Drag

The FX front office has evolved to accommodate the shift from a voice brokered market – resulting in transparency, efficiency, liquidity and consistency – by bringing counterparties together so they can interact more effectively. In doing so, all participants have benefited from lower frictional costs and greater transparency.

Sadly, the same cannot be said of FX post-trade processing, which still uses much of the same basic infrastructure it used to support voice broking. In two decades, it has remained essentially unchanged, resulting in legacy processes/practices that are wholly unsuited to supporting electronic trading as conducted in today’s FX front offices. These processes/practices are also excessively costly, to the extent that post-trade costs can now even exceed the potential profit from the execution of a trade.

At the core of the problem are the fragmentation, replication and complexity of internal processes. This is hardly surprising given that at least 23 services are usually involved in managing current FX post-trade activities, which inflates both costs and operational risks. Multiple vendors are needed, as are multiple copies of the same trade (20+ is not untypical). At the same time, existing legacy processing technology cannot keep up with market evolution and so requires additional outlay to pay for the manual processes needed to cover its shortcomings.

In some cases, extremely costly processes persist. These could be dispensed with altogether in a more efficient processing environment. A case in point are confirmations, the costs of which at some top tier FX banks – just for their EB and PB businesses alone – run to nearly USD5mn per year.

Attempts to respond to changes in the front office by changing post-trade methods have also made the situation worse, as new substandard processes are layered on top of an already fragile and inefficient process stack. Each new process added therefore effectively exacerbates an already suboptimal process flow, in terms of both cost and risk.

These issues apply across all FX-related instruments, which when one considers that volume in uncleared FX derivatives (a market approximately twice the size of spot) totaled ~USD88trn at 2018-year end, illustrates the sheer magnitude of the problem. In fact, for FX derivatives, the risks and costs of these operational limitations are even more acute, as the processes involved are more complex than for spot.

These issues are collectively hampering the FX market’s overall efficiency and growth. This applies across bank to client, bank to bank and prime brokerage segments. In some cases, it is already causing market distortion, such as driving participants to review their position in FX prime brokerage. Given the FX market’s established reputation for resolving structural issues of this nature, it should be possible to find a solution internally, rather than directly involving external bodies, such as regulators.

Credit

A related area that is also creating unnecessary cost and risk – as well as damping liquidity growth – is credit management. Given the large trading volumes now conducted via API and at high frequency, FX is probably the market least tolerant of latency. Yet despite this, antiquated and fragmented credit management processes still persist, causing significant practical problems. Workaround remedies have emerged in an attempt to address these but create different problems instead. Credit kill switches are a case in point, because they can create disputes when clients find themselves having to reduce positions at unfavourable prices and also requiring a manual unwinding process, exposing both clients and banks to further issues.

Credit-related risks, such as over-commitment, still remain stubbornly high, while workaround remedies actually reduce credit efficiency, such as over-allocating to accommodate localised management of credit within venues. Costs are also an issue in credit management, with top tier banks spending considerable amounts unnecessarily on redundant/inefficient credit processes and technology.

The Remedy

The good news is that a solution is already entirely achievable at technical level. The obvious remedy is a single centralised shared ledger platform using standardised data that can handle all the necessary post-trade activities (plus credit) in one solution. It would mean that compliance with many of the principles in the GFXC’s FX Global Code of Conduct could become an achievable and immediate reality rather than merely being aspirational. A case in point is the principle relating to real time monitoring of trading permissions and credit provision

A centralised industry shared ledger platform would deliver multiple practical benefits across the market place. The most obvious would be to eliminate duplication and cost saving. Instead of running multiple versions of inadequate processes, participants could handle trades using a single set of consistent industry-standard processes. In the long term this could deliver cost savings of up to 80%, with ~50% possible in the medium term.

An additional benefit is cost transparency. In the current environment, with the accumulation of multiple layers of legacy operations and credit technology/processes, it is often extremely difficult to determine the post-trade cost of a transaction. A central standardised process would by contrast make the measurement and monitoring of post-trade costs straightforward and potentially deliver the same degree of transparency as already available for FX execution costs.

This shared ledger approach would also deliver various credit management benefits. For instance, the availability of near real time credit data would enable more efficient credit processes, such as:

  • Preventing erroneous credit cut-offs (thus improving client relations)
  • Making more efficient use of available lines
  • Avoiding over-commitment risks
  • Alleviating balance sheet pressure

Centralising credit management using a shared ledger enables more dynamic control across all types of trading relationship (bilateral, tri party and quadri party). This will dispense with the need for over-allocation and rebalancing in order to accommodate localised management of credit within venues. Those issuing credit will also be taking control of it (as is the case in equity markets) and will therefore be able to recycle it back into the market in the most efficient manner (a key consideration for non-CLS currencies and non-CLS members). Ultimately this will result in venues receiving business because they offer the best price, not because there is residual credit left at them.

In operational terms, workloads will also reduce when using this sort of solution, as less remediation will be required. Efficient credit management and automated processing will drive a reduction in failed trades, thereby also reducing the need for manual intervention and repair.

Liquidity and Regulation

The cost and efficiency benefits delivered by a centralised industry shared ledger platform have important implications for liquidity and market participation. Trading volumes in G7 pairs have been declining in recent years for a variety of reasons, but operational/credit inefficiencies are clearly playing some part if they are cutting trade margins to near zero.

If individual ticket processing costs decline significantly, then logically this will boost existing participants’ willingness to trade, both in general, but also potentially in smaller transaction sizes. By the same token, new participants may be encouraged to join the market once they can see that the processing cost burden and operational risks have been alleviated.

Finally, there are also prospective regulatory advantages to the FX market adopting a centralised shared ledger solution. Some regulators are already clearly aware of the issues, as shown by the FCA and BoE’s convening of a ‘Technology Working Group’ to reform post-trade processing so as to reduce complexity, encourage innovation, and improve systemic resilience. A shared ledger platform could support this initiative in various ways, but one of the most obvious is with regulatory filings.

At present, participants (often using manually intensive processes) incur substantial costs collecting trade data and submitting it to regulators. Market-wide adoption of a shared ledger solution would instead make it possible for participants to submit regulatory filings far more easily, plus do so in a consistent format. This would enable better monitoring of any potential systemic risks, plus delivering lower regulatory costs for all concerned (including regulators). Central banks could send a strong message here by adopting a shared ledger solution for their own trading activities, which would also serve as a clear signal to the organisations they regulate.

Conclusion

Adopting a single centralised utility for FX post-trade functions based on a common data standard ticks numerous boxes for all market participants. These include considerable cost savings, reduced credit/operational risks and better use of balance sheet, which in turn also facilitate greater trading activity and more diverse participation, as well as enhanced price discovery and lower regulatory overheads. Finally, it will also reinforce the FX industry’s existing reputation for innovating in the common interests of all market participants.

A new drive has launched to develop multi-trillion dollar trade as an asset class

Fourteen leading global financial institutions have launched a drive to use technology and standardisation for the wider distribution of trade finance assets.

ANZ, Crédit Agricole CIB, Deutsche Bank, HSBC, ING, Lloyds Bank, Rabobank, Standard Bank, Standard Chartered Bank, and Sumitomo Mitsui Banking Corporation are among the banks backing the Trade Finance Distribution Initiative (TFD Initiative).

TFD Initiative is powered by Tradeteq, the global trade finance distribution platform. Tradeteq’s technology allows banks and institutional investors to efficiently connect, interact, and transact.

The International Chamber of Commerce (ICC) United Kingdom and the International Trade and Forfaiting Association (ITFA), the leading international association for banks and financial institutions involved in cross-border trade and forfaiting, have each joined TFD Initiative as an observer.

Trade finance is private financing that helps businesses cover mismatches between payment obligations and payment receipts resulting from the buying and selling of goods and services. It is a vital piece of the financial sector that supports importers and exporters as they conduct their trade activities.

Trade finance presents a compelling multi-trillion dollar investment opportunity for institutional investors seeking sources of attractive risk-adjusted returns with low correlation to stocks or bonds. TFD Initiative will initially focus on creating common data standards and definitions to enhance operational efficiency and improve risk management, creating a blueprint for global trade finance asset distribution.

Surath Sengupta, Global Head of Trade Portfolio Management at HSBC said: “As the world’s number one trade finance bank1 , HSBC is at the forefront of the industry in harnessing the power of new technologies to make trade faster, safer and more competitive. While trade finance is currently an attractive asset class for banks, we believe technology will unlock investment from non-bank investors by removing complexity and making the underlying asset data both more structured and accessible.”

Nicolas Langlois, Managing Director and Global Head of Trade Distribution & Liability and RWA Optimization CSDG & Transaction Banking at Standard Chartered Bank, commented: “Closing the financing gap in trade finance is about providing financing to small and medium sized enterprises. This requires developing new digital solutions to package those portfolios in a standardised format accepted by a broad range of investors and to achieve speed of execution.”

ANZ’s Damian Kwok, Head of Trade Portfolio Management and Head of Trade and Supply Chain, Australia, New Zealand, Pacific, observed: “Trade Finance is the lifeblood that is needed to support businesses and enable them to thrive in our communities. Therefore, it is imperative that the financing community continues to work together to support the growing requirements.”

Anthony van Vliet, Global Head of Trade & Commodity Finance at ING, said: “In Trade & Commodity Finance, it’s all about connecting global supply chains in food, energy and industrial activities. By bundling the expertise of global banks, the TFD Initiative bridges the gap between the US dollardominated commodity trade finance sector, and institutional investors who are not traditionally engaged in this part of the real economy.”

Sumitomo Mitsui Banking Corporation’s Kazuo Yoshimura, General Manager, Global Head of Supply Chain Finance, Global Trade Finance Department added; “Trade growth is vital for continued economic growth and global development. Bringing alternative investors into trade finance will provide additional funding to corporates globally. It is, therefore, that SMBC welcomes the Trade Finance Distribution Initiative as a playing a crucial role in establishing trade finance as an asset class.”

Naeem Khan, Global Head of Trade Finance at Crédit Agricole CIB said: “We anticipate growing needs in terms of automation of the trade finance distribution market which will enhance investors’ reach and bring distribution efficiency. This is a key step in the right direction to facilitate global trade finance market growth.”

Shaahien Mottiar, Head of Trade: Southern & Central Africa and Head of Trade Asset Management at Standard Bank, said: “The application of technology is now enabling the involvement of non-traditional trade participants and investors. The TFD Initiative is a catalyst in driving the growing modernisation of trade and trade finance, and in developing an asset class directly connected to real economy transactions. For developing markets this means bridging the gap between perceived and real risks, and in-turn, creating opportunities for renewed sustainable growth and development.”

Shaahien Mottiar, Head of Trade: Southern & Central Africa and Head of Trade Asset Management at Standard Bank, said: “The application of technology is now enabling the involvement of non-traditional trade participants and investors. The TFD Initiative is a catalyst in driving the growing modernisation of trade and trade finance, and in developing an asset class directly connected to real economy transactions. For developing markets this means bridging the gap between perceived and real risks, and in-turn, creating opportunities for renewed sustainable growth and development.”

“I believe the TFD Initiative offers the opportunity to create a global network for trade originators and liquidity providers to connect, interact and transact efficiently, thereby establishing trade finance as an easily accessible and attractive asset class for non-bank institutional investors,” concluded André Casterman, Board Member at Tradeteq.

To learn more about TFD Initiative and to read the white paper or enquire about membership, please go to www.tradefinancedistribution.com.

ParFX wins top accolade at Central Banking Awards 2019

ParFX, the wholesale electronic spot FX trading platform, has been named the winner of the Financial Market Infrastructure Services Award at the Central Banking Awards 2019.

The Central Banking Awards recognise extraordinary examples of public service, pioneering activities, best practice in policy, governance, economics and management and innovative practice in service provisions by market practitioners.

ParFX was selected as the winner by the Central Banking Awards Committee in recognition of its significant contribution to improving efficiency and reducing risk in the financial system. The committee comprises members of Central Banking’s editorial staff and the Editorial Advisory Board, chaired by Central Banking’s Editor Christopher Jeffery.

Roger Rutherford, Chief Operating Officer at ParFX, comments: “Central banks have played a prominent role in promoting best practice and improving standards in the FX industry. Winning this award is strong validation from this important community of ParFX’s work to increase fairness, equality, and transparency in the FX market.

“Since the platform’s inception five years ago, we have contributed to and brought about the industry-wide dialogue that led to the development of the FX Global Code, which is already making waves across the market. This is a very positive start to 2019 for ParFX, and we are looking forward to continuing our mission to improve trading behaviour in the FX market.”

Chris Jeffery, Editor-in-chief of Central Banking Publishing said: “Central banks have worked hard to instil best practice within the USD 5 trillion-a-day foreign exchange market but there are many areas where it is difficult to mandate a truly global change. ParFX has supported the central banking community by leading an effective market effort that has helped to create a better functioning FX environment.”

ParFX was founded in 2013 and is governed by a group of leading global FX institutions. The company was one of the first trading platforms to commit to the FX Global Code and it continues to attract business from all segments of the FX market.

ParFX’s top 10 most active counterparties are now equally split between the largest banks and non-banks, demonstrating how all market participants are attracted to the platform’s principles and seek to engage in good trading behaviour in a fair and transparent trading environment.

Holiday season slump begins early – November Spot FX Volumes

As investors start to wind down their activities in November to prepare for the fast-approaching holiday season, volumes were down across all platforms with the exception of Fastmatch, which saw volumes rise for the first time in five months.

Volumes

EBS reported a 1% decrease in spot FX trading activity, with volumes dropping from $88.7 billion in October to $81.6 billion in November. On a year on year basis, volumes saw a 0.5% drop.

Refinitiv’s spot FX volumes shrank 4.3% both month on month and year on year, recording an ADV of $90 billion in November.

Fastmatch reported a rise in volumes in November for the first time in five months. Its volumes saw a 5.7% increase from October to $20.3 billion and a 12.8% increase when compared to the same period last year. A promising sign for the firm following public difficulties in 2018.

Cboe FX experienced a drop with spot volumes decreasing by 5.5% from October to $34.6 billion. Year on year growth was 1.8%.

FXSpotStream continued its strong performance, recording a higher ADV than Cboe FX (formerly Hotspot) for the first time in its history. Its ADV in November was $35.5 billion – down marginally from October but up an impressive 61.1% year on year.

CLS reported a spot FX volume of $455 billion, representing a 4.3% decrease from the $471 billion reported in October.

 

Summary of top stories

 

GFXC holds two-day meeting in Paris

As reported in FX Week, the Global Foreign Exchange Committee met at the end of November in Paris to provide an update on progress so far. It plans to publish the findings of the cover-and-deal and disclosures working groups in 2019 – something to keep an eye out for as the Code gathers momentum.

British cartel traders acquitted of rigging currency market

Three British traders were acquitted of using an online chatroom to fix prices in the $5.1 trillion-a-day foreign exchange market. Galen Stops, editor of Profit & Loss pondered whether a jury outside of financial-friendly New York would’ve came to the same conclusion in an opinion column in November.

CME finalises acquisition of Nex

On November 2, 2018, CME Group completed the acquisition of Nex. The company estimates $200 million in run-rate cost synergies annually by the end of 2021 from this buyout.

Trading firm XTX picks Paris for post-Brexit EU hub

As reported in Reuters, leading electronic market-maker XTX Markets said it had chosen Paris as its European Union hub after the UK exits the bloc so it can continue to trade across Europe after Brexit.

 

Tweets of the month

 

Katie Martin on bursting bubbles…

So, the sterling experienced a bit of volatility in November…

Clear evidence incumbents aren’t ready for the fintech revolution…

 

LiquidityEdge sees record trading volumes in October

Electronic US Treasuries (UST) trading venue LiquidityEdge today announced record trading volumes during October 2018.

Average daily trading volumes reached USD 15 billion, whilst on 3rd October, participants traded over USD 22 billion in US Treasuries across both on-the-runs and off-the-runs.

The surge in activity has been driven by favourable market conditions and the growing popularity of the directed, disclosed model championed by LiquidityEdge. As the line between the traditional sell-side and buy-side continues to blur, participants are seeking more flexible methods of accessing liquidity, tighter prices and greater depth of market.

Since launching in September 2015, LiquidityEdge has rapidly grown its UST market share and volumes, firmly establishing itself as an alternative model for fixed income. A diverse and continually growing community of over 100 institutions including primary dealers, regional dealers, professional trading groups and buy-side clients trade across the entire Treasury curve on a daily basis on LiquidityEdge’s platform.

Nichola Hunter, CEO of LiquidityEdge, comments: “Our aim from the outset has been to provide participants with the choice and flexibility of how they want to access liquidity. The latest trading data demonstrates the confidence and trust the market has in our model and we have no doubt that as market structure continues to evolve, we will continue to see record growth on the platform.”

Dominic Holland, Head of Fixed Income Electronic Markets at BNY Mellon Capital Markets, LLC said: “LiquidityEdge provides the market with a fresh, innovative take on US Treasury trading at a time when clients are adjusting their portfolios amid rising interest rates. BNY Mellon is always looking for new sources of liquidity for our clients so we are delighted that the platform has been embraced so enthusiastically by the marketplace.”

Eric Einfalt, Head of Strategic Development at XR Trading said “LiquidityEdge is among a handful of innovative platforms pioneering the direct streaming model in US cash treasuries.  As a premier global liquidity provider, XR Trading is happy to be partnering with LiquidityEdge and others well positioned to help shape tomorrow’s market structure and usher in fair and efficient access to the fixed income market.”

Spot FX volumes show impressive year-on-year growth

NEX reported a 5% decrease in spot FX trading activity as its volumes dropped from $101 billion in May to $96 billion in June. This follows a 21.7% increase in May from April. Year-on-year volumes are up a healthy 15.7%.

Thomson Reuters’ spot FX volumes have seen a small rise of 1.9% to $109 billion in June. It has experienced month on month growth since April when it recorded $95 billion, its lowest ADV since December 2017. June’s ADV represents a 17.2% increase when compared the same period in 2017.

Cboe FX’s spot volumes suffered the most in June, dropping 7.3% to $38 billion, compared with May’s $41 billion. Year-on-year painted a more positive picture for the platform with growth of 36% in spot FX volumes.

Spot FX volumes on Fastmatch fell by around 4% from $23 billion in May to $22 billion in June. This represents a 10% increase year on year.

FXSpotStream experienced the biggest increase this month, rising 7% from $28 billion in May to $30 billion in May. This represents a substantial 50% growth from the $20 billion recorded in June 2017.

Spot FX

Insight

So far this year, electronic trading platforms have seen strong performances in the spot FX market. June 2018 was no different with overall volumes across Thomson Reuters, FX SpotStream, Nex, Cboe FX and Fastmatch up 21% on June 2017.

Spot FX platforms have bounced back after a slow start to Q2. In April, all of the platforms recorded a decrease in trading activity, with the exception of Fastmatch.

Following large increases for all platforms in May 2018, we have seen a mixed picture of trading activity for the five spot FX platforms in June.

Key currency pairs came out of the wait-and-see mode they experienced in April. This is reportedly because volatility increased in May and June due to rising geopolitical tensions, concerns about trade wars and the prospect a global economic growth boom is nearing its peak.

A key focus over the past month or two was on the regulatory side with the Global Foreign Exchange Committee (GFXC) meeting taking place in South Africa on 27 June. At the meeting in Johannesburg, the GFXC appointed new Chair, Simon Potter, and Co-Vice Chairs, Adrian Boehler and Akira Hoshino.

It also revealed that more than 300 institutions have now signed up to the FX Global Code.

The GFXC has established a new group to deepen engagement with the buy-side, so all eyes will be on these institutions over the coming months.

Future predictions

The US-China trade war came to fruition with a first round of tariffs on $34 billion of Chinese imports on July 6, followed by a second round on $16 billion of imports.

The US’s trade partners including the EU, Canada and China are set to respond to latest U.S. trade barriers with retaliatory tariffs of their own. Starting in July, we could be getting dangerously close to a full-blown trade war.

Hopefully policymakers can put economics ahead of politics and come to a resolution to ensure unimpeded trade flows.

SEB chief EM strategist, Per Hammarlund, told FX Week that this trade spat could support the dollar in the short term, given the risk-off sentiment.

But, over the longer term, the event will undermine US growth, as well as its economic leadership, and weigh on EM currencies “for years”, Hammarlund says.

“Once countries lock themselves into a tit-for-tat battle, they will find it very difficult to get out of the spiral.” “If growth continues to slow, the EM FX sell-off will be prolonged, even if markets would see a temporary rebound if the US and China reach an agreement,” he says, adding that any interest rate hikes by the Federal Reserve will trigger a sell-off in EM currencies.

Sign up here to receive our monthly Global Spot FX Activity report.

SWIFT and CSD community advance blockchain for post-trade

SWIFT and seven central securities depositories (CSDs) have signed a Memorandum of Understanding (MOU) to work together to demonstrate how distributed ledger technology could be implemented in post-trade scenarios, such as corporate actions processing, including voting and proxy-voting.  The group will investigate the types of new products that can be built using it, and how existing standards such as ISO 20022 can support it.

Abu Dhabi Securities Exchange, Caja de Valores, Depósito Central de Valores, Nasdaq Market Technology AB, National Settlement Depository, SIX Securities Services and Strate Ltd are among the CSDs participating in the DLT project with SWIFT. Additional CSDs are expected to join in the coming weeks.

“To ensure interoperability and smooth migration, it is crucial that new technologies support existing common standards such as ISO 20022,” says Stephen Lindsay, Head of Standards at SWIFT. ““ISO 20022 is a messaging standard but also defines terminology across asset classes and corporate actions. An agreement on using the same set of definitions and concepts is important, as they will be independent of the technology or data format.”


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R3 distributed ledger consortium strengthens presence in Asia

The consortium, which launched twelve months ago with 9 members, continues its rapid expansion with the newest addition of China Foreign Exchange Trade System (CFETS).

In recent months, R3 has seen continuous growth in Asia, with Asia-based firms Ping An and AIA announcing their membership with the R3 consortium earlier this year.

The recent 2016 Fintech Innovators Report, which evaluates and ranks the world’s top 100 fintech companies, showed that firms based in the Asia-Pacfic region claimed 5 of  the top 10 positions, so it’s no surprise that start-ups are flocking to the continent.

CFETS will join neighbouring Asia-based firms at the R3’s Lab and Research Centre, to develop Corda™, its shared ledger platform specifically designed to record, manage and synchronise financial agreements between regulated financial institutions.

David Rutter, CEO of R3 comments: “Acknowledging the Chinese renminbi’s growing prominence in trading and the crucial role China holds in the global financial markets, we are delighted to welcome CFETS to the R3 consortium. Their expertise will be an enormous asset as we develop universal applications for distributed ledger technology across increasingly globalised financial markets.”

Zaiyue Xu, Executive Vice President of CFETS, comments: “CFETS is committed to establishing technical standards and improving the ecosystem of China interbank market, and we have noticed that blockchain is an emerging technology with great promise to reshape the market.  Through cooperation with R3, we hope to build the infrastructures and platforms for blockchain application in the financial market together with international counterparts.

 

Cybersecurity: could a global standard be the answer?

A committee of central bankers are working with the Bank for International Settlement (BIS) to explore ways of tackling the threat cybersecurity poses for the financial services industry – in the first initiative designed to set a global common standard.

With cyber attacks against financial services firms continuing to escalate, the need to standardise best practice across the industry has becoming a pressing issue for many.

According to a PWC report, in 2015, 38% more security incidents were detected than the previous year, while theft of hard intellectual property increased 56% in 2015.

As the volume and severity of security breaches increases, regulatory organisations and governments are also voicing concern. The FCA recently reported a huge spike in the number of reported incidents, from just five in 2014 to 75 in 2015. While these numbers are likely to only touch the tip of the iceberg when compared to those attacks that go unreported – the statistics still present a worrying trend.

New York Gov. Andrew Cuomo has also proposed cyber security regulations for banks, which would increase the onus on technology departments to invest in cyber protections. The prospect of mandated investment in cyber security comes at a difficult time for the banks, as they grapple with compliance issues and growth in competition from non-bank firms.

Yet, many institutions are already taking proactive measures. A 24% rise in security budgets split across a number of initiatives designed to mitigate the risk of cybersecurity breaches, such as employee awareness programmes and enhanced monitoring tools, appears to be paying dividends. PWC noted a 5% decline in financial losses associated with cyber attacks in a year-on-year comparison.

However, the absence of a common standard has led to discrepancies in the ability for some financial institutions to handle online attacks, something that has become particularly apparent in developing economies across Asia.

With up to 90% of Asia-Pacific companies targeted by cyber-attacks this year, a 76% rise from the year before, many firms are playing a high price for breaches online.  $81.3bn out of a global total of $315bn was lost to cyber-attacks in the region exceeding those in North America and the EU by about $20bn.

Yet, the consequences of a security breach are also reputational. With many financial services firms acting as custodian for sensitive  information – the need to stop data from entering the wrong hands is a critical issue.

But there is now growing recognition that a proactive, cross border response is required. Recent attacks affecting Bangladesh, the Philippines, Taiwan, Thailand, Vietnam, and Japan, have prompted officials to gather in Singapore next month to discuss how these economies can mitigate the impact of cyberattacks.

Already this year, Japan has made proactive moves to introduce reforms that will allow the country’s banks to invest directly in technology to defend against cyber-attacks.

While national programmes designed to increase cybersecurity is certainly a step in the right direction, the need for a common global standard should not be underestimated.

Much like the global Code of Conduct for the foreign exchange market, also spearheaded by the BIS, a solution must be universal in its application to instigate comprehensive, rather than siloed progress.

BIS FX Code of Conduct Offers Reasons For Optimism

Chris Salmon, Executive Director of Markets at The Bank of England, highlights the reasons to be optimistic about the new FX Code of Conduct, which will launch in London next May.

The BIS Code of Conduct is arguably one of the largest, most ambitious and comprehensive efforts to introduce globally-accepted standards and guidelines to govern conduct and behaviour in the foreign exchange market.

Initiated in 2015 by the Bank for International Settlements (BIS), it is designed to establish a single, global code of conduct for the wholesale FX market and promote greater adherence.

The process is well advanced and remains on track to launch in May 2017, according to Chris Salmon, Executive Director, Markets, Bank of England. As a senior official at the UK’s Central Bank, he is actively involved in the development of the Code. His speech at the ACI Financial Markets Association in London provided great insight into why global regulators and market participants remain positive about the final Code.

Chris Salmon highlighted four reasons for optimism. The first is the substance of the Code itself. It will directly address the complexity of the FX market and provide guidance where it is necessary, he says.

Secondly, he reiterated the importance of keeping the Code up to date. Its completion in just two years means it should be relevant for today’s market when published. Importantly, he adds, the new Code will not be allowed to stagnate; the BIS is committed to developing an appropriate review mechanism so that the Code stays up to date and evolves as the market evolves.

Third, the process for developing the Code is inclusive and unprecedented in many ways. The Code will apply to the buy-side, sell-side, non-bank participants, trading platforms and other market infrastructure providers. Therefore, there is engagement from all types of key market participants, including 40 members of the Market Participants Group (MPG), chaired by CLS CEO David Puth, and regional FX Committees. This ensures the final Code will get buy-in from a wide range of diverse market participants.

Lastly, he highlighted how the Code is one of a suite of important initiatives that have launched in recent years to improve conduct in FICC markets. Initiatives such as the FICC Market Standards Board, created as a direct consequence of the Fair and Effective Markets Review, and UK Senior Managers and Certification Regime, soon to be extended beyond banks to all FCA authorised firms, will aim to raise standards of market conduct by strengthening the accountabilities of senior management. These initiatives, combined with a greater focus on conduct, create a supportive environment for the objectives of the Code.

While this will be received well by the FX market, he also cautions that the Code will only rebuild trust if it is actively used by market participants and drives a market-wide shift in culture and attitudes – one that embeds behavioural norms that are consistent with both the letter and spirit of the Code.

This type of cultural shift is not something that can be mandated; ultimately, that change must come from the industry. Firms that assimilate the Code fully are likely to benefit, over time, from greater trust in the marketplace, a stronger reputation, and a higher long term franchise value.

Individually, firms and senior personnel should start considering the steps they will take to support the Code. In a world where competition for market share remains fierce, winning the trust of clients matters financially.

To this end, Mr Salmon recommends three elements be put in place to realise the benefits of the Code.

First, the Code needs to be embedded in firms’ practices, training and education; second, firms should have the right policies and procedures in place to ensure that they are able to monitor how successfully they have embedded the Code; and third, firms should be able to demonstrate publicly that their behaviour and practices in the FX market are in line with the Code’s principles.

The first phase of the Code was well received by the FX industry, and there is no doubt that the widespread use of a common public attestation could be a powerful tool. It would provide a strong signal of a firm’s commitment to following good practices and rules that are applied internationally across borders.

The launch of the second phase will be an important milestone in the industry’s efforts to reaffirm trust in the FX market. It is no secret that all has not been well in FX or FICC markets more generally; the completion of the Code of Conduct, and its application amongst individual firms, will send the right signal to clients, regulators and employees.

The full speech by Chris Salmon can be found here.

Blockchain set to streamline reference data market

Blockchain consortium R3 CEV have announced a collaboration with capital markets technology provider Axoni, to test how blockchain technology can be used to enhance the reference data market. The project, which also involves Alliance Bernstein, Citi, Credit Suisse and HSBC is the latest example of how the financial services industry is finding new applications for the technology.

Reference data has become a real issue in financial markets of late as it accounts for up to 70% of the data used in transactions, but continues to be supported by legacy technology that often requires manual processing and constant upkeep. With reference data adding significantly to operational costs and ultimately affecting the bottom line for cost conscious institutions; it is a market ripe for innovation. 

Moreover, as the market continues to grapple with regulatory measures designed to ensure firms manage and maintain the quality and accuracy of their reference data, many are now exploring the possibility of streamlining the process via a distributed ledger. 

In partnership with Axoni, R3 CEV recently completed a multi-month proof of concept (PoC) exercise, coordinated by Credit Suisse. The prototype was created using Axoni Core to simulate the management of reference data on the blockchain, and also inform corporate bond issuance. The technology enabled participants to interact with reference data after issuance, with any proposed changes requiring validation by the underwriter to ensure the ledger provided a single, unchangeable record of all data related to the bond.

David Rutter, CEO of R3, comments: “Quality of data has become a crucial issue for financial institutions in today’s markets. Unfortunately, their middle and back offices rely on legacy systems and processes – often manual – to manage and repair unclear, inaccurate reference data. Distributed ledger technology – which allows financial institutions to push these functions to a cloud environment – removes the need to reconcile multiple copies of data, providing a sophisticated and agile solution to the headaches currently caused by these legacy systems and processes.”

Whilst the study of distributed ledger technology’s application to reference data is still in its early stages, this project marks the first step in testing its potential.  

What to expect at SIBOS 2016

With over 8,000 business leaders set to descend on Geneva for the annual SIBOS conference next week, this year’s event comes at a poignant time for the industry.

More than 200 exhibitions and hundreds of conference sessions will take place over four days, bringing together decision makers from banks, market infrastructure providers, multinational corporations and technology vendors.

With the industry continuing to grapple with a number of developing issues, from the emergence of disruptive technology and the ongoing impact of regulation and cyber crime to the potential implication of a Brexit, there is plenty to talk about.

The theme of this year’s event, ‘Transforming the Landscape,’ will explore issues surrounding the future of payments, securities, cash management, trade and financial crime compliance.

To help you keep track of what to look out for, we’ve picked out some key highlights from the programme agenda:

  • Cyber resilience in a changing world, Monday 26 September, 09.00 – 10.00
  • Patterns of disruption in wholesale banking, Monday 26 September 09.30 – 11.15
  • Insights on Blockchain: a panel discussion of early adopters hosted by IBM, 26 September, 11.30 – 12.00
  • When RegTech meets FinTech: the day after tomorrow – How technology disruption intersects with regulation in securities, 27 September 10.15 – 11.15
  • Fintech hubs – EMEA, 27 September, 12.45 – 13.45
  • After the Brexit, what’s next: A BRICS-it towards a multilateral financial system?, 27 September, 15.30 – 16.30
  • Machine learning – The future of compliance, 28 September, 09.00 – 10.00
  • Open API’s and the transformation of banking, 28 September, 16.30 – 17.15
  • Capital markets: Big data, big deal, 29 September, 09.00 – 10.00
  • Financial centres outside of the EU – What can the UK learn from Switzerland, 29 September, 10.15 – 11.15

Details of the full programme can be found on www.sibos.com

Derivatives industry gathers to discuss market reform, opportunities and challenges

The great and the good from London’s derivatives industry descend to FOW Regulation to discuss G20 reform, Brexit, Basel III and all things MiFID II.

More than 200 banks, brokers, vendors and buy-side participants gathered at the Grange City Hotel to find out how MiFID II and other European and international regulations will impact trading, risk management and regulatory operations in the global derivatives market.

Attendees at the 4th annual FOW Regulation conference participated in presentations, panel discussions and Q&As on the implementation of MiFID II, MAR and Basel III, the impact of Brexit, algorithmic trading, compliance and trade reporting. With representatives from regulatory bodies, banks, buy-side institutions, legal firms, technology vendors and trade bodies all offering their views, the audience was offered a broad range of views from different perspectives. MiFID II was undoubtedly the topic on everyone’s mind.

Although it remains the centrepiece of European regulatory reform, and still looks certain to be introduced in the UK, fundamental questions remain over London’s capital markets and the competitive advantage or disadvantage that Brexit will bring. The early morning panel discussed what Brexit meant for the implementation of EU regulatory reform in the UK and its interaction with Europe and the rest of the world. This was followed by a panel discussing the plethora of reforms across the world seeking to bring greater oversight, transparency and accountability to algorithmic trading.

With differing approaches and definitions in place, new rules are increasing complexity for firms in the market. The debate focused on how will Reg AT in the US impacts Europe, how to manage obligations across a global trading book, how MiFID II will transform algorithmic trading and what trading institutions should do to meet regulatory requirements. The final panel of the morning discussed the complexities of trade reporting in an increasingly automated trading environment.

The EMIR reporting requirements were introduced amid confusion from the market and reports of miss-reporting and over-reporting were rife. But this has not dampened the appetite of regulators to enforce new rules, and many expect a tougher stance to be taken with MiFID II reporting. There were also fruitful discussions around the Market Abuse Regulation regime, which came into force in July with unprecedented scope and ambition, Organised Trading Facilities (OTFs) and the increased requirements for commodity derivatives. But another prominent challenge for the derivatives industry that became clear throughout the day was the management of capital rules.

Already, a number of large FCMs have pulled out of the market and more rules, including MiFID II, CRD IV and the new IOSCO requirements, are coming down the line. Panel members and the audience discussed how this will impact liquidity and trading activity and how banks and buy-side firms can adapt. Overall, the reform of financial markets continues to gather pace and it remains the case that regulation remains at the forefront in the post-2008 regulatory environment.

The complexity of compliance in an electronic, automated environment remains a concern, but participants were also given insight into the innovation taking place amongst technology vendors and trading institutions to stay ahead of the regulatory curve. 12 months is a long time in financial services and we could be looking at a very different market in a year’s time.

FCA sets out fertile ground for fintech innovation

The fintech sector continues to grow at a rapid rate. According to a PWC report, which explored how the sector is shaping financial services around the world, over USD 50 billion has already been invested in roughly 2,500 fintech companies since 2010.  And investment is expected to accelerate to over USD 150 billion over the next three to five years.

But while the value delivered by innovative technology companies in financial services has become abundantly clear, particularly in areas such as blockchain, data analytics, machine learning and peer-to-peer trading, the industry also requires a flexible regulatory framework that facilitates growth and innovation – rather than stifling it.

As Caroline Binham notes in the Financial Times, it is an issue that the FCA appears to be handling well. In a separate EY report, the UK is singled out for its friendly regulatory stance — topping the global survey as the most fintech-friendly jurisdiction — closely followed by California and New York. The EY report recognised the progress the UK has made in securing a competitive advantage against its rivals, stating; “The UK benefits from a world leading fintech policy environment, which stems from supportive regulatory initiatives, tax incentives and government programmes.”

Clearly, a number of FCA led initiatives designed to promote innovation and market competition appear to be paying dividends. One of the most prominent examples, the ‘regulatory sandbox’ outlined in 2015 as part of Project Innovate’, enables firms to test products for compliance purposes at an early stage in order to fast track the adoption of financial technology by the market.

All this is encouraging a dynamic sector to grow further. As Matthew Hodgson, CEO of Mosaic Smart Data, noted in an article on fintech investment earlier this year, “London is almost perfectly positioned at the intersection of finance and technology. In the last 24 months, the Capital has acted as a hotbed for venture capital investment for a variety of fintech firms pioneering new technologies designed to disrupt traditional business models, but also to enhance existing ones through collaborative partnerships with established financial services providers”.

But amidst competition from tech hubs in Silicon Valley, Berlin, Hong Kong and Singapore for fintech investment and top talent, the need to provide an attractive ecosystem for new and rapidly evolving companies is not just optional, but obligatory.

As Fintech Focus noted in a piece exploring fintech investment in Asia Pacific, the region has benefited from a massive jump in financial technology investment, rising from USD 880 to nearly USD 3.5 billion in the first nine months of 2015. All this represent a serious challenge for London’s fintech scene.

While London remains ahead of its peers in the race to provide fertile conditions for innovation and growth, the threat of global competition means the capital must continue to maintain its creativity in order to retain its crown.

Bridging the divide: finance and technology

The annual P2P Financial Systems workshops (P2PFISY) for 2016 hosted by University College London (UCL) brought together academics, technologists, policy makers, regulators and fintech providers to analyse how technology is changing financial services.

The event was attended by The Bank of England (BoE) and a diverse range of experts to address questions of practical importance on: digital currencies and Blockchain technologies, P2P lending and Crowdfunding, digital money transfer,  mobile banking and mobile payments.

Victoria Cleland, Chief Cashier at BoE, outlined the latest wave of fintech activity with a particular focus on distributed ledger technologies (DLT) and the central bank digital currency (CBDC) as part of her speech ‘Fintech: Opportunities for all?

“We are undertaking more fundamental long-term research on the wide range of questions posed by the potential of a central bank-issued digital currency (CBDC). Whether a CBDC would be feasible and whether it would benefit the economy and the financial sector, over the medium term are big issues, and the answers remain far from clear. We have embarked on a multi-year research programme so that any future decision is informed with a full understanding of the implications”, Cleland said.

Cleland also noted that since 2010, more than $50bn has been invested in roughly 2,500 fintech companies’ and over 24 countries are currently investing in DLT with $1.4bn in investments over the past three years. In addition, over 90 central banks are engaged in DLT discussions and more than 60 have joined blockchain consortiums like R3CEV.

Cleland further emphasised the need to explore and understand how we define fintech and the impact it is having. “We need to understand what fintech means for the entities we regulate, how it might impact the overall safety and soundness of the financial system, and how it could alter the transmission mechanism for monetary policy.”

The pace of fintech innovation and investment has rapidly increased in recent years. PWC estimates that within the next three to five years, investments in fintech will exceed over $150bn. However, the firm also highlighted how the lines are being blurred between technology firms and traditional financial institutions in a report entitled, ‘How fintech is shaping financial services’. Accordingly to the research, 83% of the financial institutions who took part in the report believe their business are at risk of being lost to stand-alone fintech companies.

Nonetheless, there is a growing understanding that traditional financial services firms and new fintech providers can collaborate and learn from each other, rather than competing for market share.

London remains centre of currency trading as volumes inch higher

Average daily volumes increase by 5% in six months to reach $2.213 trillion.

London continues to maintain its position as the centre for currency trading, according to data released by a group of leading central banks.

According to the Bank of England, the UK traded an average daily FX turnover of $2.213 billion in April 2016 – an increase of 5% from October 2015. This was driven by a 7% increase in GBP/USD, while emerging markets currencies such as USD/TRY and USD/MXN also fared strongly.

In contrast, $893.2 billion was traded across North America – 1% higher than in the corresponding period of 2015. On a six-month basis, however, it was a more positive story, with average daily volumes increasing by 10%.

In Asia, Tokyo secured second place internationally, with $1.217 billion traded on average every day – an increase of 5%. Singapore also increased daily volumes by a quarter to $506 billion, while Australian turnover also inched higher.

Each central bank published the data on their respective websites. The full data from the Bank of England can be found here.

R3 blockchain consortium leaders rise up technology rankings

Two top R3 executives featured on industry rankings in technology this week.

David Rutter, CEO of R3, and Richard Gendal Brown, CTO, appeared on the Institutional Investor Tech 50 and the Financial News Fintech 40 respectively.

David ranked at number 18 on this year’s Institutional Investor Tech 50 list, recognising the financial market acumen and technological sagacity that led him to launch R3 in 2014. The consortium now boasts over 55 institutions working with R3 to develop applications for distributed ledger technology in the financial services market which could change financial services as profoundly as the Internet changed media and entertainment.

Richard was named one the most influential people in the European financial technology sector for his work with R3, which includes overseeing the team of developers responsible for Corda, R3’s distributed ledger platform for financial services.

R3 Investigates Smart Contract Templates For Blockchain Inspired Platforms

R3 is spearheading efforts to understand and address the challenges of developing master templates for smart contracts, the self-executing contractual agreements used to trade, record and manage assets on distributed and shared ledger platforms. The firm is also exploring how these features could be implemented within existing legal and regulatory frameworks.

Following the R3 Smart Contract Templates Summit in London and New York in late June, R3 has agreed to collaborate with a diverse working group of its consortium members, standards bodies, law firms, academic institutions, exchanges and market infrastructure providers, including Barclays, the International Swaps and Derivatives Association (ISDA), Norton Rose Fulbright and University College London (UCL). The group will begin exploring the development of repositories of smart contract templates for banks to download and use on blockchain-inspired platforms, such as R3’s Corda.

At the summit the group discussed potential roadmaps for development, with a short-term focus on understanding the challenges of connecting existing real-world legal contracts for products such as interest rate swaps, to smart contracts – enabling the simplification of legal documentation and mutualisation of costs for banks.

The R3 Smart Contract Templates Summit’s presentation is now publicly available here:

Currently each bank stores its own instance of contracts, which can introduce inconsistencies and reconciliation challenges. Smart contracts operating on distributed and shared ledgers enable each of the parties to see the same agreed set of legal documents.

The group’s longer term goals include working with the legal community and academics to investigate how to take smart contracts to a point where they can be admissible in court and used for entry into dispute resolution. An update will be given at the second R3 Smart Contract Templates Summit later this year.

R3 Develop Solution To Prevent Blockchain Front Running

According to R3, the blockchain model as it stands will not be suitable for financial services, as it would allow everyone to see exactly what was being traded, when it was being traded and who by – potentially allowing competitors the opportunity to front-run each other.

CEO, David Rutter and Managing Director, Charley Cooper, explain how R3 is trying to strike the balance between the original purpose of the blockchain – to have a public record of transactions that must be verified by the majority of involved parties – and maintaining an appropriate level of transparency and anonymity as required by banks, financial institutions and regulatory authorities.

To read the full article in Fortune, please click here.

CLS and TriOptima Win Best Post-Trade Services Provider Award

Less than a year after its launch, the triReduce CLS Forward FX Compression Service – the first of its kind in the FX market – scooped Best Post-Trade Services Provider at the FX Week Awards 2016 after saving banks more than $66 billion in notional exposure.

Trade compression is a vital tool in portfolio and capital management. CLS and TriOptima partnered together to address a critical gap in the market, which has now been acknowledged by the judges of one of the FX industry’s most coveted awards.

The triReduce CLS FX Forward Compression Service combines CLS’s infrastructure and market connectivity with TriOptima’s triReduce compression product, and enables participants to reduce the gross notionals of their outstanding portfolios without fundamentally changing their market positions.

Launched at a time when international regulators encouraged compression services for non-centrally cleared OTC derivatives, the new service reduces operational, credit and counterparty risk for institutions and enhance capital efficiency. It is consistent with the goals of EMIR, Basel III and Dodd-Frank, all of which seek a more robust and transparent post-trade environment.

To read the full story, please click here

Fintech Innovation In The Capital

A Q&A with Matthew Hodgson, CEO of Mosaic Smart Data

Why is FinTech innovation in London gaining traction compared to other areas of the world?

London is almost perfectly positioned at the intersection of finance and technology. In the last 24 months, the Capital has acted as a hotbed for venture capital investment for a variety of FinTech firms pioneering new technologies designed to disrupt traditional business models, but also to enhance existing ones through collaborative partnerships with established financial services providers.

 Which areas of financial services have been most impacted by FinTech development? 

Within the fintech sector, the field of data analytics has quickly become the new opportunity in financial markets. The ability for financial institutions to move beyond the realm of ‘big data’ by applying real-time analytics on multiple sources of electronic trade data is already providing the most technologically astute banks, hedge funds and asset managers with significant competitive advantage.

However it is the ability to harness predictive analytics that remains at the cutting edge. Much of this capability already exists and is being used to considerable effect, especially by technology giants such as Google and Facebook.

The technology will allow financial institutions such as banks to gain deeper insight into client trading behaviour, ensure higher levels of client retention and shape product and services offering to maximise future revenue opportunities. Gartner, a Harvard research institute has predicted that by 2017, firms with predictive analytics in place will be 20% more profitable than those without.

For some traditional companies is it purely a case of ‘adoption’ rather than ‘disruption’ behind rise of the fintech sector?

The financial technology market has exploded in recent years. Innovation is driving major improvements in the level of service experienced by the end user, however when it comes to financial services, businesses are naturally more wary of the type of ’disruptive’ technology that has transformed other areas of our day-to-day lives such as calling a cab or booking holiday accommodation – after all, we can always call another cab if our Uber doesn’t turn up, but if a billion dollar payment doesn’t reach its intended recipient we have a much more complicated issue on our hands.

The institutional financial services space is much more about collaboration between fintech firms and established players – it is this combined firepower that delivers truly sustainable technological innovation.

Should investment banks or lenders move to disrupt their own business model to avoid losing market share?

Many traditional service providers such as global investment banks are coming to the realization that they need to partner with emerging innovators. 

As such, finance and technology has become synonymous, and data analytics, in particular, is moving to the forefront of efforts to provide new solutions to on-going market challenges.

However, for large players such as global investment banks, the integration of new and specialist fintech solutions should be implemented on a modular basis to work in collaboration with existing systems. In many cases, the reality of effective integration is one of evolution, rather than revolution.

The Currency Ethicist: One Man’s Push to Fix a Tarnished Market

Last week, the Bank for International Settlements launched a code of conduct for market professionals operating in the world’s largest and most liquid financial market – foreign exchange – and in doing so, laid out its vision of how banks, asset managers, hedge funds, corporates and infrastructure providers should behave and operate when exchanging an estimated USD5.3 trillion a day.

At the heart of this initiative was David Puth, Chairman of the BIS Market Participants Group. A former JPMorgan Chase & Co. and State Street Corp. executive, David led the initiative alongside his role as chief executive officer of New York-based CLS Group, a utility that settles trillions of dollars of currency transactions a day and is considered by the U.S. Treasury to be a systemically important piece of the financial system.

He spoke to to Bloomberg about the importance of developing industry-led guidance around trading behaviour and best practice requirement, and how the code of conduct aims to provide a common set of guidelines to promote the integrity and effective functioning of the market.

Read the article, or watch the Bloomberg interview

Greenwich Associates FX Report: A bite size digest

Greenwich Associates has published an interesting report covering the changing nature of liquidity provision in the global foreign exchange (FX) market, as well as the impact of macroeconomic and regulatory factors in driving a market structure evolution.

The paper, entitled Diversifying Liquidity: Attaining Best Execution in FX Trading, highlighted the continuing growth of non-bank liquidity providers, with the largest FX dealers executing less than half of global buy-side FX volume.

However, despite the growth of competition from non-bank liquidity providers and the challenges posed by incoming regulatory requirements, interviews with over 1,600 top-tier foreign exchange users globally found that the world’s largest dealers are expected to continue to play a major role in facilitating FX trading.

The report also noted growing demand for a more granular understanding of best execution by utilising sophisticated transaction cost analysis (TCA) tools to analyse existing trading relationships and engage with new counterparties.

The rise of electronic execution and the subsequent decline of voice brokerage was also striking, with a 32% jump in buy-side trading handled by multi-dealer trading platforms and a 50% reduction in phone-traded volume since 2008. These changes contributed to an overall growth in electronic trading, which now accounts for 73% of all FX volume executed annually.

In line with the growth of electronic trading, a jump in the adoption of FX algorithmic trading amongst the hedge-fund community was particularly notable. From 2014-15, automated execution amongst this group of traders almost doubled from 33% to 61%; in contrast, the growth in adoption rates for fund managers and pension funds showed a mere 5% rise over the same period.

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Lananh Nguyen at Bloomberg covered the growing popularity of algorithmic trading amongst hedge funds here

David Rutter: leading the blockchain and Treasuries revolutions

R3’s David Rutter is profiled in this month’s Risk magazine, charting the former ICAP e-broking chief’s inspiration to form the bank consortium focused on developing blockchain-inspired technology, as well as new US Treasury platform LiquidityEdge, which is now going head-to-head with the likes of BrokerTec and Nasdaq’s eSpeed.

Read the full article.

R3 recognised at Sell-Side Technology Awards

Blockchain consortium R3 scooped Best Sell-Side Start Up and Best Overall Sell-Side Product of the Year at this year’s Sell-Side Technology Awards earlier this week in New York.

In his write-up of the evening’s proceedings, Victor Anderson, Editor at Waters Technology, charted the firm’s innovative approach to developing blockchain and distributed ledger technologies, as well as its partnerships with leading financial institutions.

Read the full article