INDUSTRY UNPREPARED FOR THE NEW WORLD OF OTC DERIVATIVES TRADING

It is still early days in the trading of over the counter (OTC) derivatives on swap execution facilities (SEFs) and organised trading facilities (OTFs). Even though it has been over four years since the G20 first proposed initiatives to mitigate systemic risk and promote transparency in the global OTC derivatives market, practitioners believe the industry is still in the throes of a revolution and remains unprepared to face a rapidly evolving marketplace. 

 

The Dodd-Frank Act in the US and European Markets Infrastructure Regulation (EMIR) in Europe represent a paradigm shift in the global financial regulatory environment. The impact of these regulations is being felt around the world, particularly the mandate of executing all derivatives subject to a clearing obligation on a regulated market, SEF or OTF. This is a significant change as it is one that alters how the market operates as well as how market participants conduct business.

U.S. FINANCIAL MARKETS: BOTH LAGGARDS AND TRENDSETTERS

U.S. capital markets typically define how the rest of the world markets operate; more financial investments are made in the U.S. than in any other country. But this supremacy hasn’t always translated to leading business and technology practices. There are situations where U.S. markets are lagging behind or have operated with known issues, and it’s important to understand where the pitfalls are/were:  

 

Decimalisation of stocks – Unlike other markets, U.S. stocks were quoted in fractions (e.g. price of stock XYU is $4 1/16 instead of $4.18) instead of decimals until 2001.  A quote in fractions results in market inefficiency, higher costs and price manipulation.  

TRADE FINANCE: THE KEY TO UNLOCKING GLOBAL ECONOMIC GROWTH

Vincent O’Brien, Chair of the International Chambers of Commerce (ICC) Banking Commission’s Market Intelligence Group, discusses the findings of the two recent ICC reports: Global Survey 2014 – Rethinking Trade and Finance and the Trade Register Report 2014.  The ICC has long been an advocate of trade finance as a means to unlocking global economic growth. Our two most recent reports have, however, added fuel to our fire with respect to providing useable data that both the market and policy-makers can use when assessing the impact of trade finance.

Together, the Global Survey 2014: Rethinking Trade and Finance (the “Survey”) and the Trade Register Report 2014 (the “Register”), form a powerful body of work for the ICC’s advocacy of trade finance as a low risk financing technique, aimed at fostering global economic growth.

FOREX TRADING FOUNDATIONS: MANAGING MONEY AND RISK

To mark Admiral Market’s first birthday, Chris explains the importance of clear money and risk management in a trader’s first 12 months.

Profitability within the first year of Forex trading is a realistic and attainable target for novice retail traders. But this outcome is dependant on many different factors. As an education Forex strategist, there is one aspect of trading which many beginners fail to develop: a professional money and risk management strategy.

It sounds daunting, but developing these systems and strategies is much easier than one might think. Those traders who take the time to develop a methodology of protecting their capital are demonstrating one key trait which separates the winners and losers in Forex trading. It’s called ‘professionalism’. Those who treat Forex as their profession always do better than those who dedicate no time to performing the basics competently.