LOOSE CHANGE

The Bank of England issued a report last week that says performance bonuses play an important role in a company's overall management of risk. The BoE warns that pay-outs based on profitability may encourage traders to take aggressive risks. The recent £50 million loss taken by NatWest Markets' options trader is one such example cited by industry executives. High bonuses often go to star traders who increase their risk exposure in hopes of creating higher profits, says the BoE report.

ABN Amro has acquired Citicorp's futures arm, confirms Perry Taylor, executive vice president of ABN Amro Chicago Corporation. He adds that ABN Amro will keep Citi's operation intact, which has centres in London, New York and Chicago.

Thomas Cook has announced that it will launch the Internet's first interactive foreign exchange web site at http://www.fx4business.com. The site's focal point, the "virtual trading desk", will provide the first real-time FX over the Internet, say officials.

A number of leading South East Asian nations have decided to extend their current bilateral repurchase agreements, designed to help defend against speculative attacks on their currencies, reports the Financial Times. The first such agreements were signed in Hong Kong in November 1995 between Indonesia, Malaysia, Thailand and Hong Kong (FXW, November 20, 1995). The swap agreements are expected to eventually extend to most east Asian countries, as well as Australia and New Zealand. The FT also reports that Asian finance ministers in the region asked the International Monetary Fund to develop a plan for a region-wide currency stabilization fund.

The push by electronic brokers and the way banks deal in the G7 currencies in the Asia-Pacific region has continued to impact the voice brokers significantly, sources say. The brokers are accordingly shifting their focus away from the G7 currencies, and instead concentrating on the regional currencies.

Tullett & Tokyo Forex recently reduced its G7 desk in Singapore by approximately 25 per cent, confirms chief executive John Nixon in London. Tullett & Tokyo has made similar moves in other parts of Asia, having merged its previously separate yen and mark desks in Sydney to form a single G7 desk. In Hong Kong, a similar move was made last year.

"Brokers have continued to suffer from a lack of volume in the G7 currencies and have continued reducing the number of people deployed in those areas," says Nixon, who adds that many of the G7 brokers have been re-deployed to other regional product areas, including currencies, cash and derivatives.