Congress clips

The New Zealand dollar, the South African rand, the Hong Kong dollar and the Korean won will all become CLS-eligible currencies on December 6, said Jonathan Butterfield, executive vice-president of marketing and communication at CLS Bank in New York.

Legal issues in Korea have held up the go-live date in that country, he told delegates at the FX Week Congress… EBS revealed the testing dates for its initiative to bring the buy side onto its spot broking platform. Paul Harris, commercial alliance manager at EBS in London, told delegates that EBS Prime banks – those that offer prime brokerage on the platform – are now partnering hedge funds, commodity trading advisers and fund managers to assess how to best enable investors to use the system. The pilot will run until the end of the first quarter, and if it works effectively investors will be allowed onto the system from Q2… For the first time on public display, electronic broker eSpeed demo-ed the new thin-client version of its central counterparty spot trading platform. The new mode of delivery, which makes the platform easier to distribute, is eSpeed's first venture into the thin-client world, said Nigel Renton, managing director of FX at eSpeed sister broker Cantor Fitzgerald in London. The model is still in beta testing and is not scheduled for release until March next year, he told FX Week… The FX industry is moving towards an exchange, Ray McKenzie, director of FX products at the Chicago Mercantile Exchange told delegates. His expectation is for a hybrid model, with pools of liquidity in different locations. Any exchange is also likely to be cross-product, he said, reflecting growing investor interest in cross-product trading. Hedge funds, for example, have recently got much more involved in trading FX and commodities, such as oil… The relationship between the sell side and the buy side in FX has never been perfect, said Jim Trott, partner in hedge fund Par Asset Management and former chief dealer at the Bank of England. However, it is shifting towards a more balanced relationship. "In the past few years, it has been predominantly sell-side led, with them developing systems for their own profitability." E-trading, for example, was very much a sell-side initiative, borne out of pressure on banks to bring cost savings to their cost base." However, "any relationship that is proven to be too unbalanced cannot continue", he told delegates, and some bank initiatives have represented "huge leaps forward" for customers. These include straight-through processing, white-labelling, CLS, prime brokerage and better audit trails. "For any relationship to have longevity it must be mutually beneficial…" Emerging markets are increasingly influential in global foreign exchange markets, Nick Beecroft, global head of FX trading at Standard Chartered in London, told delegates in his plenary session at the FX Week Congress. This can be seen in the issue of the Chinese exchange rate policy, which has been a key focus for investors this year. "The timing of the yuan revaluation is dominating financial markets," said Beecroft.

Standard Chartered believes changes to the yuan trading band could happen "at any point", but is likely to be triggered by the completion of banking reforms or development of the onshore yuan derivatives markets.

Standard Chartered's expectation is for a +/- 2.5% move in 2005 as an initial step towards a full market-based exchange rate.