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THOMSON REUTERS

2015 EDITION

THOMSON REUTERS OVERALL MARKET SHARE WINNER MULTI-DEALER PLATFORMS

In association with

REDEFINING CONDUCT IN THE FX INDUSTRY

THE CHANGING ECOLOGY OF THE FX MARKET

GROWTH CURRENCY: RENMINBI

featuring Guy Debelle, Reserve Bank of Australia

featuring Douglas Cifu, Virtu Financial

featuring Beng-Hong Lee, Deutsche Bank

VALUING FX VOLATILITY by Ron Leven, PhD, Thomson Reuters

FX EXCHANGE THOMSON REUTERS

2015

CONTENT

INTRODUCTION

ARTICLES 2 Redefining Conduct 5 Tectonic Shifts 10 Growth Currency 12 Looks Can Be Deceiving

FX in 2015: all change Over the 34 years in which Thomson Reuters has been active in foreign exchange, there has arguably never been a period of more significant change in the industry than we are witnessing in 2015.

CONTRIBUTIONS

Against the backdrop of conduct-related fines and the growing burden of capital, the sell side is now much more focused on profitability and risk management than on growing market share.

EDITORIAL

For the buy side, assets under management continue to grow, but risk is now being priced very differently, so firms find themselves facing the twin challenges of increased risk and less liquidity. As asset managers and corporates deal with that trading risk, they need to manage their orders much more actively than they did in the past.



Joel Clark Freelance Journalist



Victoria Hood Head of Marketing, FX and Fixed Income Thomson Reuters, Financial & Risk

In this second edition of FXExchange, we examine these induxtry challenges through the lens of a number of key themes, including market conduct and the changing ecology of the FX market. We also consider the increasingly important role of the Chinese renminbi, and offer some ideas and tools to track the effects of volatility on currency values.



Ron Leven, PhD Head of FX Pre-Trade Strategy Thomson Reuters, Financial & Risk



DESIGN AND DEVELOPMENT

I hope you find the insights useful, and look forward to continuing to work with our partners and clients in the coming year.



Thomson Reuters Global Creative Services

Phil Weisberg Global Head, FX, Thomson Reuters

© 2015 Thomson Reuters S020842/5-14

2

REDEFINING CONDUCT

THOMSON REUTERS FX EXCHANGE

In the two years that have passed since damaging allegations were first made about improper behaviour among foreign exchange traders, the microstructure of the industry has been more closely and widely scrutinised than ever before. But while the market manipulation that has been unearthed has clearly damaged the industry’s reputation, significant progress has already been made to address key issues. “Most market participants still care very deeply about the integrity of the industry and have been working collectively to come up with constructive suggestions to address past failings. In the long term, dealing appropriately with these conduct issues will be to the industry’s benefit,” says Guy Debelle, assistant governor at the Reserve Bank of Australia and chair of the Australian Foreign Exchange Committee.

By Joel Clark

Investigations into benchmark manipulation have cast a long shadow over the FX industry, but efforts to address what went wrong through stronger behavioural standards are now well advanced.

Standard-setting bodies and industry leaders began addressing key policy objectives even before regulators had completed their investigations into manipulation of FX benchmarks. A working group of the Financial Stability Board (FSB), co-chaired by Debelle and the Bank of England’s Paul Fisher, was convened early last year and published its final re