Research Highlights

View All

  Report

FX Market Trends: Managing Diversity

2017-06-28

EXECUTIVE SUMMARY The US$5 trillion-a-day foreign exchange market has found a new paradigm as it matures, already visible as the leading players hunt better customers instead of chasing more business. Their formulas are reshaping the rules for all participants and starting a scramble to adapt. In this latest report, Opimas will show the lay of the land and highlight winning ways of side-stepping risks and benefitting from new opportunities. FX veterans should not have been surprised by the contraction of trading volume noted by the BIS last year in its triennial survey of the markets, as they in fact started to grow more slowly a decade ago across all instruments. Under the new paradigm, Opimas does not expect the FX spot market to rebound significantly in the future as riskier directional trading in spot declines. For other reasons, we expect some small growth of volume in forwards and swaps. Overall, we estimate that in 2019 the average daily volume executed in the FX market will be in line with 2016 levels at around US$5.1 trillion.  Regulations, scandals and a fall in global trade and capital flows have all dented the market, although most of the recent rules were designed with a light touch. Regulators recognise a complex market that is relatively efficient and poses less risk to the world’s financial system than other markets.  FIGURE 1. FX TRADING BY INSTRUMENTS   Source BIS , Opimas estimates Currently, only non-deliverable forwards (NDF) have shifted significantly to central clearing. The move was massive: LCH’s subsidiary, ForexClear, recorded a 723% increase in cleared volume in April, compared to the same period last year. It remains to be seen if the new rule for posting variation margins for FX OTC derivatives will have a similar impact on the FX swap market, if no initial margin is required.  While recent regulations overall have had a limited impact on FX markets, some rules had enough force to create the new paradigm for FX Markets. Higher capital adequacy ratios did push numerous dealing banks to become more selective market makers and cut back their prime brokerage services, notably in the wake of the Swiss National Bank’s abandonment on the peg in January 2015. Moving from quantity to quality business, sell-side institutions as we said have evolved from acting as volume magnets, and are now pursuing counterparties with a good credit profile.  In the past, the strong growth in FX trading was partially driven by increasingly active high-frequency traders (HFTs) and commodity-trading advisors (CTAs). HFTs’ growth in this market is slowing as banks retrench from prime brokerage, even if prime of prime players are partially filling the gap. Other factors in the slowdown are an extended period of tight spreads, the commoditisation of HFT strategies, and the use of trading safeguards such as “speed” bump.  Now, the attention-getting players in FX are specialised liquidity providers such as Citadel Securities and XTX Markets that are using sophisticated quant technologies to win significant market share. In fact, we expect that by 2019, three of these principal trading firms (PTFs) will be amongst the top ten FX liquidity providers.  Responding to the changing market, exchanges have recently made some significant acquisitions of FX trading venues.  Bats bought HotSpot FX, Deutsche Börse took over 360T and Euronext added FastMatch. While acquirors traditionally paid around US$7mn per US$bn of ADV, Bats and Deutsche Börse forked out a material premium, spending US$14mn and US$12mn per US$bn of ADV respectively.  While this expansion into new asset classes is strategic for these exchanges, a failure to grasp the essence of these trading venues could quickly lead to a disaster. The FX market is neither fully OTC nor totally exchange-like, even for spot FX. Recognising that, the acquirors must now try to keep the people and the FX “know how” of their targets by retaining existing incentives and not imposing their own equity structures on them. At the same time, the exchanges must impart their own knowledge. The central limit order book (CLOB) side of the acquired FX platforms could certainly benefit from the exchanges’ experience in operating this type of venue and the innovation required. Deutsche Börse, in buying 360T, also has a significant opportunity to offer a complete gamut of post-trade services, particularly by clearing OTC derivatives through its  Eurex Clearing subsidiary.  Real synergy is valuable. Amongst trading venues, Thomson Reuters clearly dominates the FX market with around US$350 billion of trading a day. The company’s current FX offering is a combination of its historical FX Matching Engine (originally developed as a pure inter-dealer platform), and its 2012 acquisition of FXall; all is under one umbrella called Thomson Reuters FX Trading that can be accessed either directly or via a Thomson Reuters Terminal.  No other company occupies such a dominant position among FX trading venues. EBS (now part of NEX group), which used to vie with Thomson Reuters on the interdealer side, has suffered from declining volumes for a number of years, and the combined volume of EBS Market and EBS Direct is estimated to be just above US$100 billion a day.  Most FX trading venues provide a variety of execution models from traditional request-for-quote (RFQ) to CLOB.  The range is necessary to gather liquidity from a heterogeneous pool of customers. This is especially true as trading venues are competing with single-dealer platforms that have been recapturing ground as of late by leveraging their client relationships and offering better prices. At the same time, these trading venues must avoid open warfare by assuring the banks that they respect their ties with clients. The banks may be relying more on electronic trading solutions, but they need more than ever to maintain their relationships with quality clients, as we have said. More acquisitions may be in the cards, as winning business and volume in FX markets requires more than offering a variety of ways to complete a trade. A trading platform must offer a clear operating framework from pre-trade to post-trade and reporting. While most trading venues have expanded their offerings to include Trade Cost Analysis (TCA), regulatory reporting services and so on, we expect more FX participants to go the partnership route with FinTech start-ups. We could see banks partnering with technology-driven liquidity providers and suppliers of innovative post-trade solutions--or trading venues might decide to share their offerings with outside suppliers of analytical solutions and trading tools.  

Our approach

Opimas is a management consultancy focused on capital markets worldwide, our mission is to help leading financial institutions set and reach their strategic goals. Our specialisation and experience as financial practitioners allow us to dedicate our expertise to clients by quickly providing insights and crafting strategies without sacrificing quality or pragmatism.

 

To renew our accumulated skills and stay at the cutting edge, Opimas routinely invests about one third of revenues in market research. In fast-changing markets these investments create a constantly updated store of intellectual capital on issues of strategic importance to our clients, not least the risks and potential costs of emerging competition and regulation.

 

Uniquely among consultants, Opimas follows an open approach to knowledge sharing, giving our clients direct access to our entire pool of intellectual capital. This means you have the choice of either using our insights and knowledge to support your strategic decisions independently, or to work directly with our specialists on a project. Either way, we have a proven record and are here to help.

Our services

Research

Strategic Advisory

Our consultants are highly specialised experts in market dynamics. We strive to be ahead of the curve and are practised at participating in brainstorming sessions to assess and guide your strategy amid evolving market trends and the competitive landscape.

 

Research

Consulting

As forces ranging from regulations to technology push toward a major restructuring of Europe’s financial industry, Opimas specialists work closely with our clients to solve the most critical challenges facing them today, whether those are improving efficiency or integrating an acquired company. Leveraging deep-rooted market knowledge acquired through our professional experience and ongoing research, the Opimas team can help you meet your greatest needs. 

Research

Intellectual Capital

Access our library of research by annual subscription. From up-to-the minute analyses of capital market dynamics, to strategies for handling new regulations or data on your peers’ performance, Opimas reports can be chosen to match your goals: You may want to understand the forces at work in challenging areas of your business, or access our guides to devising and executing a successful strategy. 

Our markets

Risk Management & Public Policy

Risk Management & Public Policy

We work with clients on enterprise risk management, governance and international public policy, analysing all their exposures and strategies. We offer advice on all categories of risk ranging from qualitative and quantitative risk strategies, stress testing and capital management, to risk analytics, risk-based performance, and the impact of regulation, risk culture and risk governance. We analyze the effect of global and regional regulations on financial stability and the competitiveness of the financial sector

Close
Asset Management

Asset Management

Our asset management specialists work on diverse issues with clients on both the buy-side and the sell-side. In an increasingly competitive market where and digital media greatly impact investment decisions, we guide them on concerns such as the evolution of the buy-side to-liquidator provider, the impact of changing regulations such as the Alternative Investment Fund Manager Directive, shadow banking regulations, the Markets in Financial Instruments Directive II, transparency requirements, the issue of asset allocation in view of the vacuum left by traditional sell-side institutions, asset allocation in an ultra-low interest rate environment, evaluations of prime brokerage services, and the changing relationship with custodian banks

Close
FICC

FICC

We offer wide-ranging research and guidance for participants in cash and derivatives markets for bonds, rates, foreign exchange and energy, as well as soft and hard commodities. We analyse regulatory and structural changes, the impact of technology and electronic trading platforms and the progress towards standardised products, as well as emerging new trading strategies and investors.

Close
Securities Servicing

Securities Servicing

We work with securities servicing institutions across the entire ecosystem of securities trading. As Europe’s financial industry restructures, our research provides a detailed analysis of the changing infrastructure, from exchanges and central clearing counterparties to custodians and central securities depositories. Our team delivers an unbiased view of the evolving opportunities and threats to all organizations involved in processing securities. 

Close
Equities

Equities

We offer wide-ranging guidance to equities traders and investors in the cash and derivatives markets. We can show how you might be affected by, and might respond to, regulatory and structural changes in the markets, the impact of technology and electronic trading platforms, new trading strategies — including high-frequency trading — and changes in post-trade processing. We survey market liquidity on a pan-European and regional basis.

Close

An innovative way to share our content

Save, collect and collaborate

Save, collect and collaborate

Our clients have the ability to personalize our platform to their needs. Saving charts and data from both entire reports or just selected passages, available anytime in your Opimas personal vault.

A video is worth  30 pages

A video is worth 30 pages

Reading is not the only way to gain insights. Opimas also delivers its analysis in videos and podcasts.

Our content fits your pace

Our content fits your pace

At Opimas, we know that one size does not fit all. We have a tailored reporting method that comes in three different sizes: a short version, which gives you the essentials you need to understand; a 15-minute version giving you a more analytical overview and a detailed version, allowing you to master a topic inside and out.

We are online, collaborative and interactive

We are online, collaborative and interactive

Opimas publishes online reports that are available anytime and interactive, inviting clients to question our analysts directly, save selected passages or charts and data in a personal vault, and share content with colleagues.

Our data is your data

Our data is your data

The Opimas platform allows direct, unlimited access to written thought leadership and videos containing our analyses, statistics, forecasts and models, which are all continuously updated. Our clients will find both extensive data created by Opimas to serve their needs, and outside data targeted and compiled by our expert analysts.

Who we are

We are a team of financial industry veterans and strategists that have worked at leading financial institutions, giving us a practical understanding of the transforming business model and the challenges clients face today.

Octavio Marenzi
om@opimas.com

Octavio Marenzi is the co-founder and managing director of Opimas. At Opimas, he directs the firm’s research in the areas of equities trading and asset management.

Octavio has performed a variety of consulting engagements including the: Creation of an international expansion strategy for a major US derivatives exchange;

Analysis of the impact of the merger of two major Austrian banks, including identification of cost and revenue synergies;

Delineation of the strategy for the merger of the back-office and technology operations of two major Wall Street brokerage firms ;

Review of non-Japan Asia equities markets for a major Japanese bank. This involved market sizing, competitive landscape, and recommendations for acquisitions.

Prior to joining Opimas, Octavio was the CEO and founder of Celent, which was acquired by Oliver Wyman. At Oliver Wyman, he served on the firm’s management committee, overseeing 2000 consultants globally. Previously, he worked at UBS in their asset management division in Zurich, as well as at Booz, Allen & Hamilton’s financial service group in New York. He received his MSc and BSc degrees in mechancial engineering from MIT.

Axel Pierron
ap@opimas.com

Axel Pierron is the co-founder and managing director of Opimas. At Opimas, he directs the firm’s research in the areas of market structure and FICC (Fixed Income Currency and Commodities).

Axel has performed a variety of consulting engagements including the: Assessment of the impact of the post-trade infrastructure regulatory evolution in Europe for a leading securities services provider;

Due diligence on a global securities servicing and IT provider for a leading European private equity firm;

Evaluation of the options available (business and trading model) for a major European exchanges to develop a fixed income trading platform Creation of a multi- market entry strategy for a global derivatives exchange;

Prior to joining Opimas, Axel was the founder of Bedade a network sourced data platform. Previously, he was the manager in charge of the global capital market practice at Celent, an Oliver Wyman company.

He received his Master from SKEMA business school.

Medy Agami
ma@opimas.com

Medy Agami is the co-founder and managing director of Opimas. At Opimas, he leads the firm’s risk management and public policy practice.

Medy has performed a variety of consulting engagements including: creating an Enterprise risk management (ERM) framework, infrastructure design, governance and strategic risk workshops for senior managers and board of directors; Designing and implementing models and liquidity risk management governance frameworks; Stress testing (CCAR, DFAST, Liquidity Stress Tests, IMF Financial Sector Assessment Program, BoE and PRA stress testing framework) enhancement, design, and execution.

Prior to joining Opimas, Medy was the head of governance at Northern Trust. Previously, Medy has also held a number of consulting, credit risk, market risk, finance, strategy, and asset management positions at Celent/Oliver Wyman, TCB, JP Morgan, and FSCM/Zone C.

He studied financial engineering and quantitative risk management for his masters in fnancial engineering from IIT. He also received an MBA from the University of Chicago where he studied capital markets.

Anna Griem
ag@opimas.com

Anna Griem is an analyst in Opimas' Capital Markets practice.

Anna Griem is an analyst in Opimas' Capital Markets practice. Prior to joining Opimas, she helped financial institutions and solution providers stay ahead of developing market trends and manage their key business and technology issues as an account manager at Celent. 

Anna also worked at UpperEdge, an IT sourcing and commercial advisory firm focused on negotiation, program management, and the complete sourcing lifecycle. Anna spent a year as a parliamentary researcher at the House of Commons in London.

She graduated Magna Cum Laude from the University of Vermont's Honors College. She speaks English and German.

Perrine Fiorina
pf@opimas.com

Perrine Fiorina is an analyst in Opimas' Capital Markets practice.

Perrine has performed a variety of consulting engagements including the: Analysis of opportunities and threats of European regulations Mifid and Code of Conduct for a leading European exchange; Assessment of a financial technology provider for a possible takeover by a private equity firm; Market study in Europe and Asia for the launch of bill payment services;

Perrine also wrote various reports including: Socially Responsible Investment in Europe and in the US; Role of Commercial Banks in Microfinance; Mobile Banking in Western Europe.

Prior to joining Opimas, Perrine was an analyst in the Securities and Investment team, as well as in the Banking team, at Celent, an Oliver Wyman company.

She studied financial engineering  for her Masters in Management from Montpellier Business School. She speaks English and  French.

Helleyne Agnellini
ha@opimas.com

Helleyne Agnellini is an associate at Opimas and she is responsible for business development.

Prior to joining Opimas, she worked at the Risk Advisory Group helping financial institutions, law firms, and corporate entities tackle their risk management needs by connecting them to the right practices and people within the firm. She follows clients from first enquiry to implementation of the account, making sure they are satisfied with the service being offered and assuring the efficient running of the process throughout. Helleyne also has previous experience working in sales within the fashion, media and art industry.

She holds an honours bachelors in international business from the European Business School in London and has also attended courses at Nanjing University and the Beijing Language and Culture University in China. She is fluent in Italian, Portuguese, English, and Spanish, and has a conversational level of Mandarin.

Media Center

Journalists and other media professionals may contact Opimas via: media@opimas.com

Opimas in the Press

 

  

February 13, 2017
Wall Street taps along to the deregulation beat
By David Wighton

 

        February 13, 2017
Meet the man who wants to save banks billions
By Yolanda  Bobeldijk

 


February 9, 2017
Dodd-Frank reversal: a liquidity boost for bond markets
By Samuel Agini, Fareed Sahloul And Mark Cobley  

 

February 9, 2017
Dan Loeb Gets A Little Too Bullish On Bank Stocks
By Antony Currie and Dominic Elliott, Breakingviews


February 8, 2017
Frontal Loeb
By Antony Currie and Dominic Elliott

February 8, 2017
EU Regulator Warns Against Easing Rules To Lure UK Banks
By William Shaw

 

February 8, 2017
What Trump's deregulation agenda misses
By John Hardwood

 

February 6, 2017
Deregulation will free up billions in revenues
With Pauline Chiou


February 3, 2017
By Gillian Tan Lionel Laurent
 

January 30, 2017
Brexit May See UK Deregulate To Keep Banks, Report Says
By William Shaw

 


January 23, 2017
Trumped Up Banks-May-Still-be-Ripe-for-Breakup
By Lionel Laurent & Gillian Tan

 


January 21, 2017
«Occupy Washington»: così Goldman Sachs domina il gioco nella squadra di Trump 
Il Sole 24 Ore

 

January 21, 2017
$25 BILLION: Trump's plan to cut Wall Street regulation is going to have a big impact
By Frank Chaparro

 

January 21, 2017
$25 BILLION: Trump's plan to cut Wall Street regulation is going to have a big impact
By Frank Chaparro, Business Insider

 

January 20, 2017
Goldman Sachs: Occupying Washington again
By Ben McLannahan

 

January 9, 2017
ICAP founder Michael Spencer’s biggest bet yet
By Tim Cave

 

January 6, 2017
New Bank Regs Top Industry's Worries For 2017, Survey Reveals
By William Shaw

 

January 4, 2017
Brexit To Dominate UK Regulatory Compliance Thinking In '17
By William Shaw

 


January 3, 2017
Banks to Bear the Brunt of MiFID II costs
By Sam Agini

 

January 3, 2017
MiFID II to Cost Over €2.5bn
By Shanny Basar

 

December 15, 2016
Job cuts announced by European banks tumble in 2016
By Ritvik Carvalho and Anjuli Davies

 


December 15, 2016
Coup de frein à la baisse des effectifs des banques en 2016

 


December 15, 2016
Job cuts announced by European banks tumble in 2016
By Ritvik Carvalho and Anjuli Davies

 


December 15, 2016
B?ncile au oprit valul de concedieri



December 15, 2016
Job cuts announced by European banks tumble in 2016
By Ritvik Carvalho and Anjuli Davies

 

December 15, 2016
Job cuts announced by European banks tumble in 2016
By Ritvik Carvalho and Anjuli Davies

December 15, 2016
Job cuts announced by European banks tumble in 2016
By Ritvik Carvalho and Anjuli Davies



December 15, 2016
Job cuts announced by European banks tumble in 2016
By Ritvik Carvalho and Anjuli Davies



December 15, 2016
Job cuts announced by European banks tumble in 2016



December 15, 2016
Job cuts announced by European banks tumble in 2016



December 15, 2016
Job cuts announced by European banks tumble in 2016
By Ritvik Carvalho and Anjuli Davies

 


December 2, 2016
JP Morgan Pulls Ahead in EMEA as Deutsche Clings to Third
By Samuel Agini and Fareed Sahloul

 

November 28 - December 4, 2016
By Max Abelson and Dakin Campbell
 

November 23, 2016
Bankers Trump Ridiculed Are Already Embracing His Future Regime
By Max Abelson and Dakin Campbell

 

November 22, 2016
Bankers Ridiculed by Trump Are Already Embracing His Future Regime
By Daikin Campbell

 


November 22, 2016
Wall Street Is Suddenly Loving This Donald Trump Guy
By Bess Levin

 


November 22, 2016
Bankers Ridiculed by Trump Are Already Embracing His Future Regime
By Dakin Campbell, Max Abelson

 


November 22, 2016
Gió chieu nào xoay chieu day, pho Wall quay ngoat thái

 


November 22, 2016
Banqueros abrazan a gobierno de Trump

 


November 22, 2016
Banqueiros ridicularizados por Trump agora abraçam seu reinado
By Max Abelson and Dakin Campbell

 


November 22, 2016
Sólo falta una carta para tener todos los índices de Wall Street
By Laura de la Quintana

 


November 21, 2016
Michael Sherwood quits Goldman Sachs role
By Philip Georgiadis

 

November 10, 2016
Wells Fargo Leads Banks Up as Trump Win Seen Curbing Warren
By Laura Keller

 

October 24, 2016
Will an Exchange Acquire an IBD?
By Shanny Basar

 

October 13, 2016
US Bank Earnings: 5 Things to Look Out for
By Ben McLannahan

 

October 6, 2016
Blockchain: The Revolution Has Been Over-Hyped
By Anthony Malakian

 


September 30, 2016
Deutsche Bank in Crisis: Three Things to Think About
By FN Staff

 

September 29, 2016
Will LSE’s Sale Satisfy Competition Regulators?
By Shanny Basar

 

September 28, 2016
Wells Fargo Scandal Reignites Debate About Big Bank Culture
By Olivia Oran

 

September 28, 2016
Wells Fargo Scandal Gets Banks to Ask Employees What Makes Them Proud to Come to Work
By Olivia Oran

 

September 28, 2016
Wells Fargo Scandal Reignites Debate About Big Bank Culture
By Olivia Oran

 


September 28, 2016
California Suspends State Investments with Wells Fargo Over Bank’s Fleecing of Customers

 

September 28, 2016
Wells Fargo Scandal Reignites Debate About Big Bank Culture
By Olivia Oran

 


September 28, 2016 
Wells Fargo scandal reignites debate about big bank culture
By Olivia Oran

 


September 28, 2016
Wells Fargo scandal reignites debate about big bank culture
By Olivia Oran

 

September 28, 2016
Wells Fargo Scandal Reignites Debate About Big Bank Culture
By Olivia Oran

 


H. G. Wells Fargo Malicious Gossip Reignites Argue Around Full-grown Savings Bank Culture
By Olivia Oran
 

September 28, 2016
Wells Fargo Scandal Reignites Debate About Big Bank Culture
By Reuters/Olivia Oran

 

September 27, 2016
CurveGlobal Expands Portfolio Margining with LCH
By Shanny Basar

 

September 22, 2016
Banks’ Brexit Plans are Headed for the Shredder
By Lionel Laurent, Bloomberg Gadfly
 

September 12, 2016
Bank Job Cuts in Cards as the Grim Slowdown Continues
By Tim Burke and Lucy Burton

 

September 7, 2016
Blockchain - Not a Panacea
By Julie Schieffer and Lynn Strongin-Dodds

 

September 6, 2016
Throsby’s Investment Banking To-Do List at Barclays
By Tim Burke and Lucy Burton

 

August 26, 2016
Exchanges Look to Diversify Towards Sell-Side

 

August 25, 2016
Blockchain is Not a Panacea

 

August 15, 2016
Warnings of Worse to Come for Banks and Fund Managers
By Tim Burke

August 15, 2016
No Country for Small Asset Managers
By Shanny Basar

 

August 13, 2016
Iran Bonanza Likely to Bypass Big Banks
By Gareth Gore

 

August 10, 2016
How I Learned to Stop Blockchain Obsessing and Love the Barry Manilow
By Izabella Kaminska, FT Alphaville

 

August 8, 2016
Exchanges Set to Venture Into Sell-Side Territory

 

July 29, 2016
Brexit Boost Eludes Europe's Investment Banks, Shows Growing Gap with Wall Street
By Anjuli Davies and Jamie McGeever

 

July 1, 2016
Busy June Shows Dodd-Frank's Benefits And Costs
By Evan Weinberger

 

June 21, 2016
ESMA Explores Blockchain’s Risks and Promise
By Lynn Strongin-Dodds

 

June 5, 2016
Blockchain – Is It Overhyped?
By Brian Bollen

 

June 2, 2016
Nasdaq Launches ‘Watershed’ Blockchain Framework
By Louis Chunovic

 

May 27, 2016
Europe Unbundles Research and Execution
By Aggelos Andreou

 

May 24, 2016
Report Bursts Blockchain/DLT Bubbles for Ops
By Lynn Strongin-Dodds

 

May 24, 2016
Running Risk Management as a Business

 

May 20, 2016
Will Blockchain Be Nirvana?
By Shanny Basar

 

May 19, 2016
Capital Markets Bright Spot: Exchanges
By Shanny Basar

 

April 18, 2016
MoneyBeat: Morgan Stanley Earnings Recap
By Kristen Scholer

 

April 10, 2016
Post-Trade: T2S Progress Report
By Mary Bogan
Best Execution

 

October 19, 2015
Morgan Stanley Q3 Profit Sinks 60% on ‘Unusual Hiccup’: Gorman

 

September 16, 2015
Market Data Management Special Report
By Max Bowie

 

 

Events

.

Get in touch

© OPIMAS, 2017. All Rights Reserved.