The Last Look…

Things that annoy me: Part 1,754. Ignorance that ignores reality in the hope that some mug falls for the sales pitch.

Things got rather busy for a while at the start of the week thanks to events in Japan, with USD/JPY spiking higher, and then France’s latest prime minister resigning pretty much hours after appointing his first cabinet, sending the euro lower. Together, the two events unsettled markets and drove the latest bout of volatility, including in FX.

As is often the case, however, I have got messages and managed to have a quick chat with a couple of people on the front line and guess what? FX markets functioned perfectly well, there was a brief moment of wider spreads, which is fair enough, but as my old friend Steve Flanagan used to tell me – there is always a price in the market throughout a move. You may not like the price, but it’s there.

Overall, it seemed to be just another busy day in markets, LPs stood in, customers got their deals done, albeit, as noted, at slightly wider spreads.

Imagine my surprise then, when I received an email from someone offering “expert advice” on the euro and yen upheaval that started by arguing the moves were “a perfect example” of why traditional two-to-seven day settlement times no longer work.

This came as a surprise to me, because last time I checked, CLS worked perfectly fine thank you, as, no doubt, did the more recent service providers in this space, but I read on.

Apparently, it doesn’t work because “Trades executed as far back as last Tuesday are settling today at completely different rates”.

Again, I am mystified. People were selling or buying dollars last week at a rate to be determined? I have known a few dealers who couldn’t remember what they did the previous Tuesday (in a couple of cases the previous hour!), but I certainly cannot recall people trading without a rate. Back in the day, you would occasionally hit the voice broker and they would say “done; I’ll be back with a name” and you knew you were wrong. They had already seen the market move against you and took the trade onto their book to (allegedly) help their points situation. That name was, however, given to you within an hour or so – and more importantly, you still knew the rate at which you had dealt. Who is trading this blind now? What are they doing, hitting a blank screen and trusting?

I stand to be corrected, but I just don’t see this happening in even the retail world, any reputable broker – and quite frankly some disreputable ones – still give you a rate at which you have traded, and they don’t randomly change it a few days later. There’s a contract involved – how do they get away with changing it?

The answer is, of course, they don’t, so where is this “expert” coming from? Well, apparently the pitch is that the world is moving to a programmable, Stablecoin-based, infrastructure.

Fair enough, I don’t disagree, but what has it got to do with politically-inspired volatility in FX markets? Nothing, of course, but some people don’t let a nonsensical statement stop them from trying to promote their business. I accept that quicker settlement will help a lot of people that use the FX market – and that we are generally accelerating settlement times globally. This however, has nothing to do with the rates at which people trade (or apparently don’t). I can only assume that our “expert” is confusing where people actually trade with a reval – but they are two very different things.

The digital assets world has a lot to offer TradFi, but absolutely ridiculous nonsense like this from a so-called “expert” – rather than helping accelerate adoption amongst true institutions, will only stall it. Too many in this world are so desperate to grab a piece of the crypto/stablecoin wealth, they will resort to absolute drivel to try to achieve. I have bad news for them. When it comes to the true institutional space, the real professionals will take one look at this authentic frontier jibberish (one for the teenagers) and turn their back.

colin@thefullfx.com