Webinar: Are you paying too much for foreign exchange?


Date: Monday, 20 April, 2015
Starting at: 2:00pm (GMT), 3:00pm (CET), 9:00am (EST)
Location: London
Contact: Dan Stevens

AUDIO: An audio replay of the Webinar. Click on the 'Play' button to listen.


Video Replay:


Banks active in the foreign exchange (FX) markets have not only come under intense regulatory scrutiny in the years since the financial crisis, but faced litigation as well. Many clients have negotiated better terms, and a number of banks that execute foreign exchange bargains have adjusted their practices to enhance transparency and deliver better value. But many fund managers continue to neglect active management of their foreign exchange costs. This webinar will explore what fund managers can do to strike a better balance with their foreign exchange providers between price and service.

Here are some of the key findings from the webinar:

  • There has been a significant amount of FX flow among asset managers. There has been significant growth in speculative FX activity although this tends not to be the preserve of traditional asset managers. Nonetheless, high frequency traders (HFTs) who account for a lot of this speculative activity are not identified as asset managers but rather market makers.
  • FX market is dominated by HFTs. It is similar to events in the equity markets with banks seemingly in decline as sources of FX prices. 50 per-cent of spot pricing in FX is now being undertaken by HFTs. However, non-spot trades remain the preserve of the banks.  Liquidity in this market is good and cost of execution is low because of the HFTs.
  • Banks cannot continue to be non-transparent on transaction costs. The recent regulatory fines around FX have exposed problems at the banks, and the on-going regulatory saga  shows no sign of abating.
  • MIFID II best execution and solvency rules under Basel III are putting pressure on the banks. The capital requirements for credit are forcing banks to withdraw from loans and FX.  
  • Banks are still vital to the market as long as they are market making. Non-bank market makers still require the banks to face the market. Banks are still credit providers to the FX market. Banks are the market facing entities and they are being paid to make markets and undertake proprietary risk. However, some believe they are under threat. Citadel has said banks are irrelevant to price formation in the spot market.  A number of banks cannot get up the tech curve with FX.
  • There are some second tier banks moving to an agency model. Not all custodian banks are moving to an agency model because they see FX as a huge source of revenues.  However, a few custodians are moving to an agency model because of the regulatory costs. The big inhibitor though is that pure custodians still see FX as a cash generator.  
  • There is a regulatory obligation for asset managers to understand FX better and look at execution processes in detail and why things are done in a certain way. FX transaction costs have only recently come onto the radar of asset managers. This increased focus on FX is being driven by the FSB, and this is requiring asset managers to do more due diligence on FX transaction charges and report back to clients. The FCA consultation on pension costs is also facilitating greater interest in this issue, so there is a regulatory drive to improve due diligence on FX costs. Firms must understand that FX is an important aspect of their business.
  • How do you measure costs? It is a complex process and the FCA consultation raises issues around complexity over implicit and explicit costs. People do not know when transactions are done and when transactions are available to individuals who did the transaction.
  • Custodians can provide time stamped trades of transactions. There will be data audits of the flow, and time stamp in and out will become more important.
  • The WM Fix is not the most efficient way to execute FX transactions. It is a box tick and a window that was the only window available to audits and asset managers to identify price. People assume it was independent and not subject to manipulation.
  • Transaction cost analysis making comparisons of WM Fix is being done. But the key is to benchmark it against the daily average. The cost of execution at 4pm is higher versus the cost of execution at noon. By using the 4pm Fix, clients are turning an insignificant FX deal into a significant FX deal. As such, these costs are hurting asset managers.  
  • Benchmarking must be independent. A lot of the data supplied by banks is opaque.
  • Historically asset owners have not been prepared to pay for what it takes to get transparency on FX transactions while asset managers have only just become aware of the issue. There is now regulatory pressure, and the UK pensions’ regulator has said pensions need to report at least annually the cost of asset management but FX is a small part of that cost. Going forward, regulatory pressures will mean cost transparency becomes more important and this will not just be confined to FX.
  • Individuals are outsourcing FX to independent currency managers, and some banks offer this service. These organisations can achieve better outcomes. External experts are actively managing FX risk and taking a view. Nonetheless, these individuals produce alpha and some asset managers are vanilla, and simply want value for money as opposed to outsized returns.
  • Bundled fees is an issue for custodians. Firms must stop looking at a single cost as there is cost subsidisation and a bundling of fees. People might be getting great deals on FX but paying excessively for other services at their custodians.  Bundled charges are something regulators are undoubtedly going to focus on.


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The webinar will be moderated by COOConnect founding partner Dominic Hobson, and will include the following panellists:


Opening and closing remarks by Dominic Hobson, Founder of COOConnect.



Nick Bradley is a managing director at Thomas Murray Investor Data Services, which advises buy-side institutions on the management of their foreign exchange costs. Prior to joining TMIDS, Nick was from 1993 to 2006 a managing director with Standard & Poor’s, where he was European Practice Leader for the Fund Ratings & Research Group and Standard & Poor’s Governance Services. At TMIDS, he is responsible for global institutional client relationship management and services delivered to that client base. Prior to Standard & Poor’s, Nick held a number of corporate and investment banking positions with leading international banks including Lloyds Bank, BancBoston, Bank of America and Credit Agricole.

Henry Wilkes is an experienced capital markets professional with a deep understanding of the foreign exchange, money and derivatives markets, gained while working for various international banks in London and New York, with a specific focus on global asset managers. From 2000 to 2013 Henry was global head of FX sales and relationship management at Brown Brothers Harriman, managing teams in Tokyo, Hong Kong, London and New York. Previously, he was deputy branch manager and head of trading at Bank Julius Baer in London for 13 years.

Andy Woolmer is Managing Director at NCFX. Andy began his career in FX at Kleinwort Benson in 1994. After periods at Citibank and Prudential he worked at SEB as Portfolio Manager for the SEB Multi-Manager Currency Funds. In 2012, he founded the groundbreaking financial technology company New Change FX, which provides an independent live streaming mid-rate for foreign exchange. He is a leading expert in transaction cost analysis, and he has been a key advisor for various global regulatory bodies over the development of independent foreign exchange benchmarks. NCFX’s clients include some of the world’s largest pension funds, asset managers, and banks.

Noel Singh joined ABNAMRO Clearing Bank NV as FX Product Manager in September 2014. Prior to joining AACB Noel worked for 5 years at Skandinaviska Enskilda Banken first as head of eFX Liquidity Sales then 4 years running their FX Prime Brokerage business. Noel started his FX career in 1993 at Dai-Ichi Kangyo Bank as a Spot FX Trader leaving in 1999 to join EBS where he spent most of his 5 years as the Nordic Account Manager before leaving to join Dresdner Kleinwort where he was instrumental in building their FX Prime Brokerage offering.





Each panel discussion will be broadcast live online. Attendees will be able submit questions online that can be put to the panellists during the webinar.


Webinar Review

Access to the recording of the webinars will be made available online in both audio and video format.