THETRADETECHFX DAILY from the floor
Ankur Pruthi is one of the most influential traders in the FX world , and one of the most experienced . He joined NBIM almost a decade ago to set up the firm ’ s foreign exchange trading desk , which launched around seven years ago , and where he runs a trading book – for one of the biggest asset managers in the world . All FX flow for NBIM funnels through Pruthi ’ s book , and he prices all internal clients and then lays off that risk . Sitting in the fixed income division and reporting to global head of fixed income trading Malin Norberg , Pruthi has traders sitting in Singapore , London , Oslo and New York . It ’ s a big team and a big job .
Long-term strategy “ What we ’ re doing here is trading out the residual risk ,” he explains . “ We ’ re not involved in managing the fund ’ s investments , so we have a slightly different focus and time horizon . We manage the foreign exchange execution risk , we ’ re not making five-year decisions , we ’ re just trying to lay off risk profitably .”
However , with the recent interest rate hikes , inflation , the energy price shock and other adverse market conditions , the last year has been interesting , to say the least .
“ Since around 2010s we ’ ve had very low volatility , so we ’ ve had a very successful trading strategy where we ’ ve been extremely patient and passive . There was no reason for us to jump onto any prices , we could just wait , let the market come to us , and keep our execution costs low . It has been a profitable strategy , but things can clearly change . There is of course this risk that your strategy isn ’ t suitable all the time – we are not dogmatic , we won ’ t sit patiently waiting to buy US dollars as the market runs away from us .
“ Our strategy is still working well in developed markets , but in emerging markets we are pivoting slightly , looking to build some capability and see how we can perhaps lay off risk somewhat differently to how we have in the past . In DM we can be incredibly patient , passive , and let the market come to us . In EM , it is no longer so easy , and that ’ s where we are seeing some challenges .
“ We ’ ve also relied on our liquidity providers for risk prices perhaps a little more than we ’ ve done in the past – they are much better equipped than we are to lay off risk when markets are fast . We try to be fair to them in terms of clip sizing , spacing , and so on , and in return we rely on them to provide tight prices so that we can get out when we need to .
“ Spreads are definitely somewhat wider right now , which is natural when volatility is higher . In the current regime , we have to be very careful in assessing liquidity and an LP ’ s risk warehousing capabilities – when the market is not moving , anyone can make a tight price in $ 100 , but when it ’ s moving 50bps in two minutes then it ’ s a whole different ball game .
Looking ahead : Ankur Pruthi on the FX Global Code Then , now , and in the future
Ankur Pruthi , head of FX at Norges Bank Investment Management ( NBIM ) sits down with LAURIE MCAUGHTRY to discuss his role in the development and ongoing upgrade of the FX Global Code .
Global code These challenges notwithstanding , Pruthi is firmly focused on how to grow , develop and protect the FX market – and to that end , has been heavily involved in the development and publication of the FX Global Code , a principles-based set of guidelines for the industry developed following the series of heavy regulatory fines for misconduct in the mid 2010s .
“ FX is a difficult market to regulate because there is no regulator as such ,” explains Pruthi .
Back in 2015 , BIS Markets Committee set up a group of senior market participants called the Market Practitioner ’ s Group ( MPG ), led by former deputy governor of the Reserve Bank of Australia Guy Debelle , which was given the task of establishing best practice for the FX community . The group decided to develop a principles-based code , because principles are difficult to arbitrage .
“ You can have as many rules as you want , and people will always find ways around them ,” pointed out Pruthi . “ But a principlesbased code that covers as much ground as possible is much harder to circumvent . We spent probably three years thrashing out what those principles should be – with an initial focus on the ground highlighted by regulatory failings .”
The 2017 version of the code came out with 55 principles , with NBIM as the first buy-side signatory . The ownership of the code has now been transferred to the Global Foreign Exchange Committee ( GFXC ), made up of 18 central banks from across the
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