2017: the biggest themes in FX

Farah Khalique
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Volatile markets, political noise and a culture revamp will be the top themes in foreign exchange for 2017, predict currency experts. Disruptive fintech firms will continue to make headway in a market that is rapidly changing in light of rising pressure on traditional market makers such as banks and demands for greater transparency

However, fund managers are changing their approach, says Validus Risk Management, with the year-on-year trend showing a move towards more customized solutions.

The report says: "The reasons given for this migration include mitigating risk of human error, increasing flexibility to present monitoring and analysis in more intuitive/customized ways, and the need for more robust solutions in general.

"This trend is not surprising given that other more mature asset classes have taken this path some time ago."

Regulatory noise

The aftermath of the currency scandal will still be felt in 2017. Mark Johnson and Stuart Scott are set to face trial in September 2017; they have been charged with conspiracy and wire fraud over allegedly front-running a multi-billion dollar currency deal. The former HSBC currency heads face up to 30 years in jail if found guilty.

Meanwhile, fired currency traders are still fighting back. Baris Ozkaptan is the latest trader waiting to hear if he has won his fight against Citi; his hearing ended in November and a decision is expected early 2017.

Market participants are hoping that when the second half of the new global code of conduct is released in 2017, it will spell the beginning of a new phase in FX.

"I am a big fan of the code; it is worthwhile undertaking," says Tod Van Name, ‎global head of FX and commodities electronic trading at Bloomberg.

"Next year you may find some firms only transact business with firms [that have] accepted this code," he says.

"I wouldn’t be surprised if firms refuse to deal with firms that don’t ascribe to the code. If we as FX professionals want to remain unregulated in many respects, we are going to have to self-police."