Annual Supplement Foreign Exchange 2009

Contents Hedging 4 The Risk Murphy’s Law Rules The FX Market Accurately predicting currency movements can make the difference between profit Of A Dollar and loss for a multinational. Fortunately, help is at hand. 6 Collapse onspiracy theories abound about the so-called demise of the dollar. When all is Spreading The Word said and done, however, the dollar no doubt will remain widely held by central Spread betting is becoming an C banks and citizens of the world, and currency values will continue to do what they increasingly popular form of FX trading. always have done since the onset of floating exchange rates: They will fluctuate. Its proponents are hoping it will grow as a risk management tool, too. The , the world’s largest financial market, experienced some very big fluctuations in exchange rates following ’ bankruptcy in Sep- tember 2008. While the FX market has settled down considerably since then, the dollar is being punished for no longer being needed as a safe haven. 8 While reports of the dollar’s death are exaggerated, it is necessary for corporate finance FX Swaps Get officials to learn to live with currency exposure. Once the Federal Reserve begins raising in- Kid-Glove Treatment terest rates, the dollar could rebound quickly. The sometimes sudden and often unpredict- able moves in the value of the dollar, the euro and the yen, as well as a host of major emerg- Foreign exchange swaps appear to be about to emerge unscathed from the flurry ing market currencies, can create a minefield for globally active companies and investors. of new regulation prompted by the recent Accurately measuring and understanding currency risk is essential for managing it prop- financial turmoil. erly. Not every position needs to be hedged, particularly if a CFO has a strongly held view on the market. In this supplement, Global Finance examines the tendency of the FX market to be subject to Murphy’s Law: What can go wrong will go wrong, and at the worst pos- sible time. There are ways, however, to avoid or limit the pain of guessing incorrectly. 10 We also take a look at FX swaps, the most popular form of trading currencies. The Who’s Who In Foreign use of swap markets by international banks to overcome a dollar-funding shortage at the Exchange 2009 height of the financial crisis caused deviations in benchmark interest rates that impaired global liquidity. Now these instruments are receiving special treatment as legislators draw up new laws for avoiding future crises. Meanwhile, retail FX trading is continuing to expand rapidly. Spread betting, similar to betting on sporting events, has become popular in the United Kingdom and parts of Europe. One key attraction is that spread-betting gains are not taxed as capital gains. Finally, as the FX markets continue to evolve, Global Finance profiles some of the most important people in the industry in a “Who’s Who” of foreign exchange. With the dollar printing presses working overtime and US deficit spending the order of the day, it is little wonder that some market participants worry that the supply of greenbacks will overwhelm demand. So far, however, the dollar’s day of reckoning has not arrived.

Gordon Platt Contributing Writer [email protected]

2 Foreign Exchange | Managing Volatility

Murphy’s Law Rules The FX Market Accurately predicting currency movements can make the difference between profit and loss for a multinational. Fortunately, help is at hand. By Gordon Platt

inance ministers and central bankers CFOs are increasingly turning to hedging current implied volatility is benign and is not have a habit of substituting “volatility” to protect foreign-sourced earnings from po- really a major problem, he points out. F for “levels” when it comes to what tential currency-related disasters. At the very In fact, one of the most lucrative trades in they perceive as out-of-line exchange rates. least they want to know what their FX expo- the FX market this year has been the “short The Group of Seven industrialized nations, sures are, even if no sharks are apparent at volatility” strategy, whereby investors sell op- for example, warned in Istanbul in October, the surface of the currently calm waters. tions that protect buyers against currency “Excess volatility and disorderly movements The benchmark three-month implied vola- movements. This strategy, known as a strad- in exchange rates have adverse implications tility embedded in option pricing for the euro dle, involves the simultaneous purchase of a for economic and financial stability.” is now around 11% and has been trending call option and sale of a put option. A call op- Actually, foreign exchange market volatil- lower for the past six months, says Marc tion is the right to buy a currency at a certain ity peaked late last year in the wake of the Chandler, global head of currency strategy price, and a put option is the right to sell. collapse of Lehman Brothers. The financial at Brown Brothers Harriman, based in New For whatever reason, sentiment toward crisis temporarily reduced liquidity in the York. “Some European officials have com- the dollar is clearly negative, Chandler says. $3.2 trillion a day foreign exchange market, mented recently about the undesirability of Based on the current spot market price and the world’s biggest market. However, FX vol- excess volatility in the currency market,” he implied volatility in the options market, the atility has been on a steadily declining trend notes. “If these concerns can be taken at face odds are almost one in eight that the euro will since those dramatic days of last fall, when value, instead of some signal protesting the rise to $1.60 by the end of 2009, and there is major currencies had some of their biggest strength of the euro, then it behooves inves- a more than one in four chance that this level single-day moves ever. tors to take a look at currency volatility, even if will be seen by the end of the first quarter The big currency fluctuations may be be- one does not have option exposure,” he says. of 2010. “The extreme dollar bearishness by hind us, but the FX market has a way of sur- A review of the available data indicates that some forecasters appears to be based on a prising the best of pundits. The currency mar- ket is ruled by Murphy’s Law: If something can go wrong, it will go wrong, and at the worst With central banks diversifying possible time. Just when banks are making a their reserve holdings, the bearish pretty penny by selling volatility options, bet- ting against big moves, something happens. story on the dollar is compelling Sudden moves in the market are what the growing ranks of online FX traders live for and The dump-the-dollar trade is getting overcrowded, which could be an what corporate financial officers fear. indication of a major dollar bottom

4 double-dip recession in the US and an earlier sive than in the past in shifting out of the dollar a strong Canadian dollar could derail the recovery in the eurozone and an earlier rate into other Group of 10 currencies,” he says. country’s economic recovery. hike,” Chandler says. “Both of these scenar- “This makes it likely that dollar pressures will ios seem exceptionally unlikely to materialize mount as, increasingly, the [dollar’s] buyers of Understanding FX Risk in the next three to six months,” he says. last resort are reticent buyers,” he adds. Accurately measuring and understanding Dennis Gartman, editor and publisher of The IMF’s Composition of Official Foreign FX exposure can improve the ability of cor- the Virginia-based Gartman Letter advisory Exchange Reserves (Cofer) data for the sec- porate finance officials to manage currency service, says, “Right now, everyone and their ond quarter of 2009 suggest not only that volatility as an enterprise risk, says Wolfgang brother is dollar bearish.” With all of the dol- central banks are talking about diversifying Koester, CEO of Fireapps. The Scottsdale, lars being printed, and with central banks di- their reserve holdings away from the dollar, Arizona-based company developed the versifying their reserve holdings, the bearish but that they are also doing something about world’s first on-demand software to help story on the dollar is extraordinarily compel- it, Englander says. The second quarter of corporations optimize FX processes. ling, he says. But the dump-the-dollar trade this year was the only time that central banks In May 2009 Fireapps introduced a new is getting overcrowded, which could be an have accumulated more than $100 billion of version of its software, known as Enterprise, indication of a major dollar bottom, he adds. reserves in a quarter, and the dollar’s share of which helps multinational companies identify Gartman compares the foreign exchange this accumulation has been less than 40%, he and resolve data-integrity issues with existing market to a boat. When all of the passen- says. “This is also the only time the euro has enterprise resource planning (ERP) systems. gers move to one side, the boat begins to list accounted for more than 50% of the accumu- “Most companies are unaware of the is- heavily to that side, he says. It is only when lation when central banks in aggregate have sues they have with their FX data,” Koester some people fall overboard that the boat is accumulated more than $80 billion,” he adds. says. “But we have yet to find one without able to regain its balance. In the fourth quarter of 2008 and the first significant issues gathering, analyzing or Other analysts are worried that since the quarter of 2009, when central banks were making effective decisions about their for- global economic recovery got under way drawing down their reserves, the drop in ag- eign exchange exposures.” Those issues at the beginning of the second quarter of gregate reserves was almost all in dollars, can make the difference between being 2009, the dollar has been among the weak- Englander says. The rebuilding of reserves profitable or not in a given quarter, he says. est of the major currencies and that this trend since then has been primarily in currencies Fireapps enables treasurers to aggregate could continue. The latest data from the In- other than the dollar. “No one wants to be FX transaction data from different sources ternational Monetary Fund, when adjusted for caught holding too many dollars, and this and various accounting systems and identi- currency valuations, show that central banks rising reluctance is increasing pressure on fy inconsistencies. Once the data is validat- are increasingly reluctant to accumulate dol- the dollar,” he says. ed, an overall exposure can be calculated. lars, says Steven Englander, chief foreign ex- Mark Carney, governor of the Bank of Companies then can use a combination of change strategist for the Americas at Barclays Canada, warned in Istanbul in October that forward contracts and options to achieve Capital, based in . “Emerging mar- corporations should become accustomed the desired degree of certainty in managing Doremus Deutscheket central Bankbanks appear Global much Finance more 84x178mmaggres- to GCIhigher 03 levels P51497a of FX Proofvolatility. 01 He 28-09-2009 also said their FX risks. n

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Spreading The Word Spread betting is becoming an increasingly popular form of FX trading. Its proponents are hoping it will grow as a risk management tool, too. By Anita Hawser

ts initial popularity—and notoriety—may that the average client on its platform typi- price of a stock or a currency pair is likely have been among sports gamblers, cally bets £1 or £3 and in a year may spend to move up or down. “CFDs use exactly the I but spread betting is rapidly developing only £1,800 ($2,850)—hardly the behavior of same trading systems as spread bets and into a popular alternative investment me- a prolific gambler. the same outputs,” says Brian Griffin, man- dium. Mention the phrase “spread betting” Denham and others maintain that there aging director of spread betting and CFDs at to some FX trading providers, though, and is relatively little difference between spread forex broker FXCM. “They are just present- you may get a frosty response. They prefer to betting and CFDs, which is what City-types ed differently to the client at the front end.” talk about CFDs, or contracts for difference. are more likely to trade than an amateur sit- Woolfe says the main difference is that prof- “Spread betting implies there is a link to gam- ting at home having a punt on whether the its earned on CFDs are not tax-free, which is bling,” says Rob Woolfe, head of FX at UK spread-betting firm ETX Capital, but he adds Denham: By putting more Woolfe: The typical spread better that the typical spread better has more of an restrictions on the trade, we can has more of an informed opinion informed opinion than just flipping a coin. give a better price than just flipping a coin Spread bets are typically a bet on wheth- er the price quoted for a particular finan- cial product is going to go up or down. The amount of money that is made or lost is based on the spread—or the difference between the buy and sell prices. While the name and the history of spread betting car- ry the whiff of gloomy smoke-filled rooms and the quiet shuffle of stacks of used bills changing hands, Woolfe says spread-bet- ting firms provide a “professional vehicle” for all kinds of investors to trade—and the activity is regulated by the Financial Services Authority (FSA). Simon Denham, managing director of Capital Spreads, the spread-bet- ting unit of London Capital Group, points out

6 Awards: tktk

one of the main attractions of spread betting Griffin of FXCM. “People have money they of risk, which is monitored by a risk commit- in the United Kingdom, where it is particu- wish to speculate with, and with spread bet- tee to ensure it remains within established larly popular. ting it doesn’t have to be a large amount.” risk parameters. Most of ETX Capital’s deals UK spread-betting firms are secretive go through the B book, and the exposure is about their daily transaction volumes, but The Route To Respectability executed in the underlying market. suffice to say, given its various advantages, Some believe spread betting needs to Other firms take a different approach. including the tax breaks, spread betting is shed its gambling stigma in order to broaden FXCM hedges every trade in the underlying becoming increasingly popular among both its mass-market appeal by educating people market, whereas Griffin says other providers professional and amateur traders. FX is the about how it can be used as a serious invest- that have not hedged all their positions can second most popular spread-betting prod- ment tool within a balanced portfolio. “It is profit from a client if they lose a bet. At Capi- uct after stock market indexes. (Virtually any an amazing way of building a portfolio,” says tal Spreads all client funds are segregated, product from sporting events to commodi- Woolfe. “You only need to put down a small and Denham says it never makes margin ties, stock market indexes and FX can form percentage of the overall contract value to calls. It is also deposit only (it does not give the basis of a spread bet.) fund your overall position.” The margin or credit), and clients’ positions are stop pro- FX spread betting accounts for more than deposit an investor needs to fund a spread tected. “Some people would say that’s re- 50% of ETX Capital’s web business. And in bet can be as small as 2%, for example, if strictive of your trading, but by putting more the current economic climate, where stocks it is a particularly liquid currency pair such restrictions on the trade, we are able to give and shares have performed poorly, “FX is as euro/dollar. Woolfe says it can also be a a better price and better margins than our just not going to go away,” says Denham of useful hedging tool for an investor wanting to competitors,” Denham explains. Capital Spreads, adding that business on its protect an investment portfolio against any There are significant differences between spread-betting platform increased by 20% future movements. spread-betting firms on prices and margin to 25% in the first six months of this year. In That strength is also a potential weak- as well as daily rolling charges for positions the UK the most heavily traded spread-bet- ness. Spread betting carries a high level of that are held overnight. FXCM also tries to ting FX products are euro/dollar and “cable,” risk, and if an investor’s long or short bet on differentiate itself by saying it is not a “mar- or sterling/dollar. a particular currency pair, for example, goes ket maker.” So every time a client trades on “The typical profile of those that spread against them, they can quickly end up in a FXCM, the trade is automatically piped to bet is a male, aged between 30 and 45 deep hole. “The biggest problem is having one of 10 banks. years,” says Woolfe, but he adds that his exposure, which you need to square,” says While there are a plethora of online company’s client list includes chief execu- Woolfe. “There is the potential for people spread-betting platforms, Denham says that tives of large companies trading their per- with a large risk appetite to gear up very high they are mostly “white labels” and that there sonal portfolios and fund managers who [up to 500:1], but typically we would see are only eight true spread-betting firms in run multinational portfolios. The number of deals in the region of 3:1 to 5:1 leverage.” the world, which he narrows down to four trades on ETX Capital’s spread-betting plat- ETX Capital typically runs two trading serious providers: IG Index, City Index, CMC form is increasing month on month, but as people have become more risk averse, the average deal size has decreased. “As we look forward and emerge The proliferation of web-based technolo- from the crisis, more people will gies has made it easier for firms to roll out online spread-betting platforms so punters take up spread betting” can click and trade instantly. But, as Woolfe points out, spread betting has been around “They may use spread betting to hedge exposures they already have in the for more than 30 years. The Internet turned market place” — Brian Griffin at foreign exchange broker FXCM spread betting into a truly retail product, as before 2000 spread betting was mostly a books: one for clients that deal in large and Capital Spreads. FXCM is the newest City product, says Denham. Brokers pre- trades and one for smaller traders. ETX entrant in the UK, and there could be more ferred to keep it that way, he adds, not want- hedges all the bets in the large trade pool as spread betting goes mainstream. ing to have to deal with amateur traders on in the market so there is no exposure risk “As we look forward and emerge from the the other end of the telephone. However, on the spread-betting company. “If the cli- crisis, more people will take up spread bet- a large majority of ETX Capital’s business ent wins [the bet], the spread-betting com- ting,” predicts Griffin of FXCM. “They may is now conducted online instead of on the pany also wins,” says Woolfe. “If they lose, use spread betting to hedge exposures they telephone. Spread betting has also become the spread-betting firm also loses, but just a already have in the market place.” It looks more popular as investors have become dis- little less.” In the second trading book, or “B like spread betting may be about to finally illusioned with traditional stockbrokers, says book,” ETX Capital assumes a certain level shed its gambling stigma. n

7 Foreign Exchange | Swaps

oreign exchange swaps, which have long been traded in the over- FX Swaps F the-counter market, have become extremely popular with interbank dealers, as well as with traders and corporations. In fact, FX swaps are considered so crucial to Get Kid-Glove the smooth functioning of the financial mar- kets that they have been given a special exemption from a proposed US regulatory crackdown on OTC derivatives. Treatment Not to be confused with cross-currency swaps, FX swaps have two legs to stand on: Foreign exchange swaps appear to be about a spot trade, or purchase for immediate de- to emerge unscathed from the flurry of new livery, and a forward transaction. These con- tracts for the simultaneous purchase and regulation prompted by the recent financial sale of identical amounts of currency with turmoil. By Gordon Platt the same counterparty are the most popular form of trading in the FX market. One cur- rency is swapped for another for a period of time and then swapped back. The cost is determined by the interest rate differential between the two currencies. FX swaps are widely used for managing liquidity and shifting delivery dates, as well as for hedging, speculating, taking posi- tions on interest rates and other purposes, according to the Federal Reserve Bank of New York. These swaps also provide a way of using the FX market as a funding instru- ment and an alternative to borrowing and lending in offshore markets. They are the main instruments used for limiting currency risk in foreign investing through the use of currency-overlay programs used for selec- tively placing and removing hedges. Of the $3.2 trillion daily average turnover in the foreign exchange market in April 2007, more than $1.7 trillion, or 53%, comprised FX swaps, according to the most recent triennial survey compiled from central bank data by the Basel-based Bank for Interna- tional Settlements. The minimum size of an FX swap is usually more than $1 million, and most interbank swap trades are consider- ably larger than that.

Crisis Roils the Swaps Market While the FX market continued to function throughout the financial crisis, BIS research- ers Naohiko Baba and Frank Packer have documented a spillover of the turmoil in Chair of the House Financial Services Committee, Barney Frank, released a the money markets to FX swap and cross- revised bill that could see companies escape new OTC derivatives regulations currency swap markets. They found that the

8 Awards: tktk

use of swap markets by non-US financial in- standardized, or customized, derivatives by modities Futures Trading Commission, says stitutions to overcome dollar-funding short- imposing higher capital and margin require- Frank’s revised bill would open too many ages caused interest rate deviations that ments on them. loopholes. “I believe it is best for a clearing- impaired liquidity in the markets. The Treasury’s proposed legislation ex- house that is managing its risk to determine Global funding pressures were evident in cludes FX swaps and forwards, saying these if a particular product should be cleared,” he the virtual shutdown of the FX swap market transactions are not considered OTC deriva- said at a hearing on the bill on October 7. after the bankruptcy of Lehman Brothers tives under the generally prevailing market Gensler also raised concerns that the exclu- on September 15, 2008, and the Federal conventions. It said these transactions have sion of FX swaps might encourage market Reserve’s announcement of a bailout pack- important economic differences from de- participants to re-engineer currency and in- age for AIG the next day, Baba and Packer rivatives: They are generally very short term, terest rate swaps to make them more like FX wrote in a BIS working paper published in have high turnover ratios and involve real swaps or forwards. July 2009. “Dealers reported that bid-ask physical exchanges of principal. The Senate has yet to take up the issue, spreads on FX swaps increased to as much The exclusion of foreign exchange swaps and it remains uncertain if broad financial as 10 times the levels that had prevailed be- and forwards from the definition of swaps ef- market regulatory reforms can be passed fore August 2007,” they wrote. fectively excludes these contracts from addi- this year, particularly with healthcare reform European financial institutions, which tional regulation under the OCDMA, accord- and a major climate-change bill vying for leg- were struggling to obtain funding in the ing to an analysis by the law firm Sullivan islators’ attention. unsecured cash markets, turned to the ef- & Cromwell. As currently written, OCDMA Meanwhile, the CME Group, the largest fectively collateralized FX swap market as a could limit or prohibit end-user access to futures and options exchange, has a vision primary channel for obtaining dollar funding. customized swaps, the report says. Unless of becoming a major central counterparty To address the problem, the Fed authorized the swap is used precisely to hedge market clearer for OTC markets, including FX swaps, a more than twofold increase in swap lines or credit risks under generally accepted ac- says Craig Donohue, chief executive of the to the European Central Bank and the Swiss counting principles (GAAP), any customized CME. “As the events of the last 12 months National Bank. At the same time, new dol- swap transaction will be subject to higher attest, structural risks such as counterparty lar swap lines were opened with the cen- margin and capital requirements, creating risk and regulatory reform are creating yet an- tral banks of Japan, England and Canada. a significant cash-flow issue for commercial other wave of change in global FX markets,” As the financial crisis continued, additional entities, the law firm says. he told an industry conference in . swap lines were later opened with Australia, The CME is expanding its Clearport Sweden, Denmark, Norway and New Zea- Swaps Face Uncertain Future clearing system from the energy and met- land, and existing lines were further expand- Responding to complaints from a wide als markets into foreign exchange. “We are ed. Many emerging market economies were range of corporations that the proposed re- developing a flexible, secure clearing service also brought into the swap lines, including forms would make it harder to manage risk for the global OTC foreign exchange mar- Brazil, Mexico, South Korea and Singapore. using tailored financial products, Represen- ket,” Donohue says. “This will combine the Meanwhile, credit default swaps and other tative Barney Frank, a Democrat from Mas- flexibility and user-choice of the OTC- mar derivatives unrelated to foreign exchange sachusetts, who chairs the House Financial ket with the risk management benefits of a have been widely blamed for contributing to Services Committee, released a revised bill clearing house,” he points out. the financial crisis. On August 11 this year, in October that would not require OTC deriv- “Throughout the crisis, we have been re- the US Treasury Department released a 115- ative trades to go through an exchange and minded that OTC markets are complemen- page draft of the Over-the-Counter Deriva- a central clearinghouse if one of the counter- tary to and have a symbiotic relationship tives Market Act of 2009 (OCDMA), designed parties to the swap is not a dealer or major with exchange-traded markets,” Donohue to comprehensively regulate OTC deriva- market participant. Thus, companies could says. “Therefore, we do not favor artificial tives. The administration proposed moving all escape the new regulations if they were us- and prescriptive government action, such as standardized OTC products onto regulated ing swaps to manage business risks. mandatory clearing,” he says. exchanges. It is also seeking to curtail non- Gary Gensler, chairman of the Com- LCH.Clearnet, which was formed by a merger of the London Clearing House and Clearnet and serves London and Continen- “OTC markets…have a tal exchanges, is also considering a move symbiotic relationship with into clearing foreign exchange trades. CLS, a bank-owned currency-settlement exchange-traded markets” system introduced in 2002, settles more than half of all foreign exchange trades. “Therefore, we do not favor artificial and prescriptive government action, Seventeen major currencies are eligible for such as mandatory clearing” — Craig Donohue, chief executive of the CME settlement through the CLS system. n

9 Foreign Exchange | Who’s Who

Who’s Who In Foreign Exchange 2009

Ilya Sorokin the bank’s foreign exchange, fixed-income 2007 to take on additional duties as head of president and CEO and equity products and their associated global markets trading, Asia-Pacific. Ritossa ActForex derivatives. He chairs the Foreign Exchange is a former member of the foreign exchange Ilya Sorokin is president and CEO of Act- Committee of the Federal Reserve Bank of committees sponsored by the Federal Re- Forex, a New York-based provider of retail New York and serves on Villanova Univer- serve Bank of New York and by the Bank of foreign exchange trading platforms. The sity’s Council for Global Leadership. England. He is now a member of the Singa- firm’s Internet Currency Trading System [email protected] pore Foreign Exchange Market Committee. (ICTS) has the ability to accommodate vari- [email protected] ous business models. ActForex enables small and mid-size financial institutions, as well as large banks, to offer online FX trading services. [email protected] Jorge A. Rodriguez Executive vice president and head of global Jamie Thorsen FX sales executive managing director BNY Mellon BMO Capital Markets A member of BNY Mellon’s operating com- Jamie Thorsen heads global foreign ex- mittee, Jorge Rodriguez manages market- change operations in Canada, the US and Resit Toygar ing and sales, business development and Europe for BMO Capital Markets. She also deputy CEO-treasury research for the company’s global markets oversees the firm’s activities in China. Thors- Akbank business. A BNY Mellon executive for more en is a member of the foreign exchange Resit Toygar is deputy CEO-treasury at Ak- than 10 years, he previously held senior committees sponsored by the Federal Re- bank, Turkey’s largest bank by market capi- treasury and foreign exchange positions serve Bank of New York and by the Bank talization. He joined the bank in 1990 and at , Citibank and Swiss Bank of Canada. served as manager of the treasury depart- Corporation. [email protected] ment before being named executive vice [email protected] president in 1998. He is a graduate of Kings- ton University, based in London, and has a master’s degree from the London School of Economics. [email protected] Firas Askari Richard F. Mahoney Ivan Ritossa managing director, foreign exchange trading executive vice president and head of global managing director, global head of FX and BMO Capital Markets and capital markets prime services, and head of global markets Firas Askari is responsible for Canadian dol- BNY Mellon trading–Asia-Pacific lar trading globally at BMO Capital Markets Executive vice president and a member of Barclays Capital and heads the firm’s foreign exchange sales BNY Mellon’s operating committee, Richard Ivan Ritossa is global head of FX and prime and trading group in London. He is a past Mahoney manages trading, sales, underwrit- services at Barclays Capital. He relocated president of the Financial Markets Associa- ing, research and electronic distribution of from the firm’s London office to Singapore in tion of Canada and has served on the Bank

10 Foreign Exchange | Who’s Who

of Canada’s foreign exchange committee. the board of electronic broker EBS until its Wolfgang J. Koester [email protected] sale in 2007 to ICAP. CEO [email protected] Fireapps Marc Chandler Wolfgang Koester is CEO of Fireapps, de- global head of currency strategy Peter Cruddas veloper of on-demand foreign exchange Brown Brothers Harriman chief executive exposure management software. Prior to Marc Chandler joined Brown Brothers Har- CMC Markets forming Scottsdale, Arizona-based Fire- riman in 2005 as global head of currency Peter Cruddas stepped down as executive apps, Koester worked for more than 13 strategy. Previously, he was the chief curren- chairman of London-based CMC Markets years at GFTA Trendanalysen, a quantita- cy strategist for HSBC Bank USA and Mel- in August 2009 to become chief executive tive currency manager. He was president of lon Bank. Chandler is an associate professor of the firm. He has taken on day-to-day GFTA from 1995 to 2000. at New York University, where he teaches management of the company he founded [email protected] classes in international political economy. in 1989 to prepare it for a public offering. [email protected] CMC Markets was the first company to of- David Gilmore fer online FX trading in 1996. Since then, it partner and economist has developed its trading software and ex- Foreign Exchange Analytics panded its products to include CFDs (con- David Gilmore is responsible for managing tracts for difference) and spread betting on Foreign Exchange Analytics’ fundamental financial instruments. coverage. Prior to founding the Essex, Con- [email protected] necticut-based firm in 1994, he spent seven Anil Prasad years providing online commentary in New global head of FX and EM local markets Derek Sammann York and London with MCM CurrencyWatch Citi managing director, global head of FX and MMS International. Anil Prasad is global head of FX and EM local products [email protected] markets at Citi, based in London. He began CME Group his career with Citibank India in 1986 and re- Derek Sammann is managing director and located to New York in 1988 to work on the global head of FX products at CME Group, currency and metals options desk. In 1992 the world’s largest derivatives exchange. he was named head of the options business. The CME earlier this year launched a series Prasad moved to London to head Citi’s inter- of smaller-size FX contracts for retail traders est rate options business in 1996. He also and investors. The CME Globex platform is Philip Weisberg has worked in proprietary trading at Natwest open 24 hours a day, and trades are instant- CEO Capital Markets, beginning in 1997. Prasad ly confirmed through more than 1,100 direct FXall rejoined Citi in 2000 as regional head of connections in 86 countries. Phil Weisberg, CEO of FXall, has led the CEEMEA (Central and Eastern Europe, Middle [email protected] company since it was formed in 2001. FXall East and Africa) trading and was named head provides automated trading and workflow of sales and trading for the region in 2003. solutions for foreign exchange and treasury [email protected] operations. More than 800 institutions have joined the multibank portal for FX trading. Jeff Feig Before joining FXall, Weisberg was a man- managing director and global head aging director at LabMorgan, JPMorgan of G-10 FX Zar Amrolia Chase’s eFinance incubator. Citi global head of foreign exchange Jeff Feig is responsible for all foreign ex- Deutsche Bank change sales and trading in the G-10 devel- Deutsche Bank is the leading provider of FX oped markets at Citi. He joined the bank in services to hedge funds and large corpo- 1989 as an associate on the FX desk in To- rations globally. Amrolia was named global ronto and has held several FX management head of foreign exchange in 2006. He positions in North America and Europe. He joined Deutsche Bank in 1995 from Credit Drew Niv was named to his current position in 2004. Suisse First Boston. From 2000 until 2004 CEO Feig serves on both the Federal Reserve he was co-head of foreign exchange at FXCM Bank of New York’s FX Committee and the Goldman Sachs. Drew Niv, CEO of FXCM, co-founded the Bank of Canada’s FX Committee. He was on [email protected] foreign exchange brokerage in 1999. Since

12 Foreign Exchange | Who’s Who

then, FXCM has become one of the largest Frederic Boillereau Todd Crosland firms in online retail foreign exchange trad- global head of foreign exchange and metals chairman and president ing, with 150,000 accounts in 200 countries. HSBC Interbank FX Prior to founding FXCM, Niv was director of Frederic Boillereau was named as global Todd Crosland, chairman and president of In- marketing at MG Financial. head of foreign exchange and metals in terbank FX, founded the off-exchange broker March 2009, when HSBC integrated foreign in Salt Lake City, Utah, in 2001. With custom- Andreas Putz exchange spot, forward and options trading, ers in 140 countries, Interbank FX offers indi- managing director as well as the metals business, into a single vidual traders, fund managers and institution- FXCM Pro global product offering. Based in London, al customers technology to trade spot foreign Andreas Putz has expanded the institutional Boillereau joined the bank’s global markets exchange online and via wireless devices. Its agency desk at the New York-based FXCM division in 1998. Since May 2008 he has 2008 trading volume totaled $750 billion. Pro. Prior to joining FXCM Pro in 2005, he been heading HSBC’s metals business. [email protected] headed FX emerging markets trading and sales at Calyon, based in London. Putz be- Gary Nettleingham Joaquim Pires gan his career at Deutsche Bank in New York. global head of foreign exchange spot and managing director and head of foreign forward trading exchange HSBC Millennium BCP Gary Nettleingham was named global head Joaquim Pires is head of foreign exchange of foreign exchange spot and forward trad- at Portugal-based Millennium BCP. He is re- ing in May 2009. He previously was Euro- sponsible for FX trading and sales, covering pean head of foreign exchange trading and a wide range of currencies and structured John R. Taylor joined HSBC in 1989. products. Pires joined the bank in 1991 from chairman, CEO and chief investment officer Banco Português do Atlântico, where he FX Concepts John Nixon started his career in financial markets in 1986. John Taylor founded FX Concepts, a New executive director; CEO of ICAP Electronic [email protected] York-based investment management compa- Broking ny for foreign exchange assets, including cur- ICAP rency overlays, in 1981. He specializes in the John Nixon was named an executive direc- analysis of cyclicality of FX and interest rate tor of ICAP in May 2008. ICAP became the markets. Taylor developed some of the first leading broker in the spot FX market with its computer models to assist multinational cor- purchase of the EBS platform in 2006. Nixon porations in managing foreign exchange risk. also is CEO of ICAP Electronic Broking and David Gracey [email protected] is responsible for strategic acquisitions as head of foreign exchange trading well as ICAP’s information business. Pre- Nedbank Capital viously, he was CEO of Tullett and Tokyo David Gracey is head of foreign exchange Forex, now part of Tullett Prebon. trading at South Africa-based Nedbank Capital, where he is the market maker on the spot FX desk in Johannesburg. He has traded in various South African markets for Mark Galant 22 years. founder and chairman [email protected] Gain Capital Mark Galant founded GAIN Capital in 1999, David Rutter Róbert Barlai and the firm has grown into one of the larg- deputy CEO of ICAP Electronic Broking head of treasury est online foreign exchange companies. ICAP OTP Bank GAIN Capital operates the Forex.com sys- David Rutter is deputy chief executive of Róbert Barlai is head of the treasury busi- tem, which has clients in 140 countries. Prior ICAP Electronic Broking. Prior to joining ness, including foreign exchange, at Buda- to forming the company, Galant helped build ICAP, he was a significant shareholder in pest-based OTP Bank, Hungary’s largest FNX into a leading provider of trading and Prebon. Rutter served in various capaci- bank. He is a member of the board of the risk management systems. Before that, he ties at Prebon, beginning in 1988. He was Budapest Stock Exchange. Barlai is respon- was global head of foreign exchange options global chief executive of Prebon Energy sible for group-wide treasury standards at trading at Credit Suisse. and managing director of the Americas for OTP Bank. [email protected] Prebon Yamane. [email protected]

14 Foreign Exchange | Who’s Who

Alan Ruskin commodities areas at JPMorgan Chase and He left State Street Global Markets in Janu- head of FX international strategy Midland Bank/HSBC. ary 2009 to found Molten Markets, an on- RBS Greenwich Capital [email protected] line trading platform, where he was CEO. At Alan Ruskin joined Connecticut-based RBS State Street, Wilson-Taylor was executive Greenwich Capital, a subsidiary of Royal Anthony S. Bisegna vice president and head of Global Link. Bank of Scotland, in January 2006. He has senior managing director and global head been a financial economist and strategist for of FX trading Nick Crawford 25 years. He was research director for Eu- State Street Global Markets global head of FX rope at MMS International in the 1980s and Anthony Bisegna manages all currency UniCredit managed the currency service on Telerate. trading activities worldwide for State Street Nick Crawford was named global head of FX In 1989 he founded IDEAglobal in London, Global Markets, including spot transactions, at UniCredit in June 2009 and is based in Lon- and in 1992 he moved to the firm’s New York forwards, emerging markets and options. don. He previously was head of interest rates office. In 1997 Ruskin helped set up 4cast’s He is a member of the Foreign Exchange and foreign exchange for North America, as North American operation. Committee of the Federal Reserve Bank of well as FX derivatives trading. Before joining [email protected] New York and holds a CFA designation. UniCredit, Crawford was global co-head of FX [email protected] trading at Merrill Lynch in New York. [email protected] Boris Somorovsky head of trading department Tatra Banka Boris Somorovsky joined Slovakia-based Barry Wainstein Tatra Banka in 1999 as a foreign exchange vice chairman and deputy head of global trader. He was named a senior trader in 2004 capital markets and global head of foreign and became head of the trading department Steve Turner exchange and precious metals earlier this year. The bank is a member of global head of FX sales Scotia Capital Austria-based Raiffeisen International. UniCredit Barry Wainstein is vice chairman and dep- [email protected] Steve Turner was named global head of uty head of global capital markets at Scotia FX sales at UniCredit in June 2009. Based Capital and global head of both the foreign in London, Turner joined UniCredit in 2005 exchange and precious metals business as global head of hedge fund FX sales and lines. The latter operates under the name European head of FX sales. He has worked of ScotiaMocatta and is a foreign financial in the FX markets for 29 years in both trad- member of the Shanghai Gold Exchange. ing and sales roles at major banks, including Wainstein is on the Foreign Exchange Com- Fabian Shey UBS and Deutsche Bank. mittee of the Bank of Canada and the Eu- managing director and global head of [email protected] ropean Central Bank’s Foreign Exchange fixed-income, currencies and commodities Contact Group. distribution [email protected] UBS Investment Bank Fabian Shey is managing director and global head of fixed-income, currencies and com- modities at UBS Investment Bank. He has led various areas within FX at UBS since Mark Kritzman 2000. Prior to that, Shey was global head president and CEO of FX exotic options at SBC Warburg, which Windham Capital Management Richard Leighton later became UBS Warburg. Mark Kritzman is president and CEO of global head of foreign exchange Windham Capital Management, based in Standard Chartered Bank Simon Wilson-Taylor Cambridge, Massachusetts. He also serves Richard Leighton is global head of foreign managing director and global head of as a senior partner of State Street Associ- exchange at Standard Chartered Bank, e-commerce ates and teaches a financial engineering based in London. He is responsible for glob- UBS Investment Bank course at MIT’s Sloan School of Manage- al FX and FX options products, as well as Simon Wilson-Taylor joined UBS Investment ment. Kritzman has done research on mea- fixed income in Europe. Before joining the Bank as a managing director and global suring turbulence in financial markets. bank in 2003, he worked in the currency and head of e-commerce in September 2009. [email protected]

16 Contributed Article: BNY Mellon

G20: A Change for the Better? By Simon Derrick, Head of Currency Research, BNY Mellon

he path towards G20 becoming the premier forum for G20 is that between the US and China, and that to truly un- “international economic cooperation” (usurping the derstand the tensions within the group it is vital to understand Trole of G8) seemed inevitable this year. Given the scale the interplay between the two. It is therefore worth highlight- of the crisis that overwhelmed the financial markets in 2008, ing that China must surely have spent the summer months it was inconceivable that the major FX reserve holders (e.g. worrying about the outlook for the USD. However, with the US China) would not have a seat at the table when these mat- unlikely to tighten monetary policy or exit emergency spend- ters were discussed. Although this move is certainly to be ing programmes at any point soon, there is relatively little applauded, this new collaboration brings its own unique set that can be done to provide anything other than temporary of problems. support for the greenback. Equally, There can, of course, be little Now that G7 China no doubt realizes that com- debate over whether this decade has plaining in these circumstances could been characterised by imbalanced has become simply prove self-defeating. Given growth globally. Moreover, few could this, in the short run China really has argue with the contention (reportedly G20, the risk is only one-way out: heightened reserve carried in the US proposal for the G20 diversification. summit) that the US needs to save that centrally Given this, it is interesting to note more and cut its budget deficit, that managed, the number of commodity related China must rely less on exports, and deals that Chinese companies have that Europe needs to make structural coordinated been involved with in recent months changes to boost business invest- (stretching from Kazakhstan to ment. However, achieving consensus change will prove Canada). Equally, we note the com- on why these problems emerged in ment from the head of Australia’s the first place, and reaching agree- even harder than debt agency that China is growing in ment among key G20 members it was before importance as a buyer of Australia’s regarding the currency policy issues sovereign bonds and (at the opposite that have contributed to these imbalances has proved difficult. extreme) the report that China’s Central Television, the main It is worth noting that even G7 often struggled to reach state-owned television company, has recently run a news a consensus on major intra member currency issues (as programme letting the public know how easy it is to buy anyone who regularly picked over the bones of the commu- precious metals as an investment. All, in one way or another, niqués can attest). Given recent history, it seems reasonable allow China to diversify (albeit indirectly) its stock of USD- to presume that the G20 grouping will find it even harder. denominated currency reserves. Put simply, it’s difficult to see a G20 communiqué that would One prerequisite for reducing global imbalances is for the be prepared to directly criticise Chinese currency policy in nations of G20 to follow a series of well-co-ordinated cur- the way that, say, the April 2007 G7 statement did. Instead, rency policies. Now that G7 has the risk must surely be that official commentary on currency become G20, the risk is that issues will be limited to anodyne warnings on the dangers of centrally managed, coordinated excessive volatility in the FX markets. change will prove even harder There is an argument that says the key relationship within than it was before.