Hear from our 2013 Speakers

michael

Michael Melvin
Head of Currency and Fixed Income Research,
BLACKROCK

Q) Can you start by giving an overview of your presentation in FX Invest West Coast?
A) The concept of "benchmarks" in active currency investing is different from other asset classes. After detailing the key differences, I will then discuss the most common benchmarks that have been proposed and why investors must be cautious in employing any particular benchmark.

Q) What have been the biggest changes to affect the FX market during your career?
A) My career has spanned a longer time than most in the business, so I take a long view on this question.
1. The growth of EM liquidity & the opportunities that have developed in trading EM currencies; in part due to the abandonment of fixed exchange rates by EM countries.
2. The "democratization" of the market made possible by a proliferation of new electronic trading venues & greater transparency allowing more efficient price discovery.
3. The advent of the euro.

Q) What are the biggest challenges for the FX market in 2013-2014?
A) Dealing with the "normalization" of monetary policy in the major countries, assuming growth continues at a reasonable pace (and correctly trading the yen in the face of the one major central bank on a diverging trajectory).
Correctly anticipating Chinese economic conditions & associated policy changes

lynnchallenger

Lynn Challenger,
Global Head of Trading,
MELLON CAPITAL MANAGEMENT

Q) What changes have you noticed in your FX business in recent years, and how has technology helped you adapt to those changes?
A) Technology for us has been a key ingredient to manage our growth and success. Clients place a variety of demands on us, limiting how we trade and clear. Some clear via a prime broker, others clear direct. Some narrow broker approved lists and some have base currencies that are not USD. To efficiently trade all orders and maintain best execution for all clients, robust technology is critical.

Our technology has allowed us to manage all of this in a programmatic way. Our traders have full control of their orders and can see the risk clearly. They can move nimbly and efficiently because broker restrictions, clearing preferences and base currency are managed by our trading systems.

Q) What are the biggest challenges for the FX market in 2013-2014?
A) New market regulations are going to be the biggest issue for FX. Central clearing and SEF trading may be disruptive to the market for a period of time systems are rebuilt and refined to accommodate the new workflows.

Q) What have been the biggest changes to affect the FX market during your career?
A) The biggest change to the FX markets has been electronic trading. It brought incredible transparency to the market which I think served to increase volumes.

Q) What currencies is your company most focused on at the moment?
A) G-20

Q) How do you see the wider industry evolving?
A) It will be interesting to see how SEF trading and central clearing impacts the market. I think we see more clearing and more execution venues (dark pools) emerge.

ron-fxc-photo

Ron DiRusso,
Co-Chief Investment Officer and Director of Research,
FX CONCEPTS

Q) How has FX performed over the past year and where have you seen the most growth?
A) It has been an interesting year for foreign exchange. We have witnessed a period where equities have rallied significantly, the death of QE is being signalled, Japan is reflating, and Europe is still singing the blues. All that has pointed to higher volatility in the foreign exchange markets. Our options portfolio has benefitted most from this effect. The market is drastically different than a year ago when central banks ruled the currency markets. Central banks are losing control, and it is being exhibited in FX volatility.

Q) How do you see the wider industry evolving?
A) I think there are huge opportunities for our industry going forward. As the central banks move towards more normal monetary policy, underlying economic fundamentals will drive currency movements and we could see an environment where there are excellent opportunities for trading. There are certainly a number of challenges, like an increasingly difficult regulatory environment, that will force market participants to adapt almost constantly to changing rules.

Q) Can you start by giving an overview of your presentation/panel in FX Invest West Coast?

A) My panel will talk about how the scope of Emerging markets trading will change over the next few years. This is an area where regulations may actually help promote liquidity, as it will force SEF's and other vehicles that add transparency and liquidity to be used. Currently EM is traded over the counter, which means each bank has their own bid/ask. Spreads will actually go down when compliance rules for Dodd-Frank go into effect for NDF's. That is just one of the points our panel will discuss. Come to the conference to witness an interesting discussion!

Q) How will the FX market structure adapt in the near future to the changes that are taking place?
A) Between Dodd-Frank and the Volcker rules, banks have been less willing to take on market risk. The flood of new agency models has not added to liquidity, it has only distributed. My biggest concern is the lack of real liquidity providers. That implies that in the event of a market dislocation, there could be huge moves as no one wants to inventory risk. Implication - Buy Tail Risk Protection!

Q) What currencies is your company most focused on at the moment?
A) We continue to focus on Emerging currencies, with a particular emphasis on the development of the CNH market. We think this is a watershed event, and will allow access to the largest potential market in the world. With addition of CNS and CNT there will be plenty of ways to access liquidity in China.

 

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