Foreign exchange
The key concerns for Schoeppe now are twofold : firstly that some firms may not be taking MiFID II seriously enough ; and secondly that non-banks are making an increasingly significant
contribution to the spot FX trading landscape as banks pull back from providing all services in that segment . The BIS survey he refers to is the Triennial survey of FX trading , which was published in December 2016 . That survey details FX volume and breaks it down by country and by the method of execution . The figures suggest a fall since 2013 ; however , Schoeppe believes this is most likely down to structural changes on the sell side rather than the buy side . “ Some Banks have decided that they are
“ Non-banks offer to fill the gaps in spot FX "
not interested in certain types of flow ,” he said . “ Non-banks offer to fill the gaps in spot FX . The banks have been neglecting that area as they feel it is not appealing for them due to the low interest rate environment . The non-banks have jumped in . They team up with research and transaction reporting providers to offer the same level of service as a bank ." If non-bank liquidity providers are gaining ground , some of the midtier banks may have cause to be concerned about their prospects – particularly given the far-reaching impact of the European Commission ’ s MiFID II legislation , as well as the impact of ISDA ’ s requirements on the collateralisation of non-spot FX trades starting in March . Schoeppe sees collateralisation and greater disclosure in the OTC markets as part of a push by global regulators that will define the direction of travel for the industry . “ This divergence could mean asset managers might want to make a
30 www . buysideintel . com March 2017