Future of Finance


Gamekeeper turns poacher to help the buy-side cuts its FX costs

Gamekeeper turns poacher to help the buy-side cuts its FX costs

No market has defied attempts to reconstruct it quite as deftly as foreign exchange (FX). The US$6.6 trillion a day market provides a handsome living for a great many people, despite a succession of embarrassing scandals and the publication by central banks of a global Code of Conduct designed to prevent them.

FX has more than survived the disappearance of 19 national currencies into the euro and is even now drawing crypto-currencies into its orbit. One reason FX has retained its freebooting personality is the fact it is regulated everywhere (because banks are regulated) but nowhere. But the real secret of its continued riches is the continuing indifference of the biggest end-users – asset managers, institutional investors and corporates – to value for money in FX. Dr Jamie Walton, co-founder of Raidne, told Dominic Hobson how he is now using the techniques he mastered as a rates quant to help those end-users monitor and trim FX transaction costs and manage the risks of market manipulation and abuse.

Questions that are being asked

1.       Historically, the buy-side has left a lot of money on the table in FX. What is the opportunity you saw and what alerted you to it? 

2.       To what extent have buy-side attitudes to FX changed?

3.       Why has reliance on the 4 o’clock fix survived as long as it has when everybody knows it allows banks to front-run transactions?

4.       Who are the natural buyers of your services – the buy-side or the sell-side or both?

5.       Within the buy-side, are you getting a better response from asset managers or end-investors?

6.       How sophisticated does a user of your service have to be?

7.       How should clients distinguish between (a) surveillance (b) benchmarking and (c) best execution? 

8.       What is different about what you are doing and transaction cost measurement (TCM)?

9.       What sort of savings can users of your service expect?

10.   How exactly can a user translate theoretical savings into real savings? 

11.   Should banks be fearful about the services you offer?