Regulatory change is "democratizing" the global currency market and creating openings for challengers to the banks that dominate trading, the new head of global foreign exchange at MF Global Holdings Ltd. (MF) said Wednesday.
The appointment of James Kemp to lead its forex push is part of the effort by MF Global Chief Executive Jon Corzine to remake the futures brokerage into a full-scale investment bank within five years.
"Some of the smaller companies involved in FX now have the opportunity to find gaps where large institutions are not covering clients in the way that they want to be covered," Kemp said in an interview Wednesday.
Corzine, the former New Jersey governor and Goldman Sachs (GS) chief, has directed MF to take the other side of client trades in markets like foreign exchange and intends to weave currency trading capabilities into a planned global platform for retail investors.
Kemp previously was co-founder and partner of Cogence Capital LLC, a short-term quantitative currency trader, which he said gives him a view into the advent of electronic trading in the $4 trillion per day forex market.
"In some areas you can compete with the universal banks because of the greater access to prices that the growth of electronic access has brought along," he said.
Broader availability to credit via prime brokerage services has allowed smaller, electronic firms to compete for currency trades against much-better capitalized giants of the business, he said.
A crop of electronic venues for trading in the spot cash market, bolstered by the influx of new forex traders, has helped develop "a more level playing field than there used to be," according to Kemp.
Regulators in the U.S., the U.K. and Europe, Kemp said, are likely to align on new requirements for certain foreign exchange derivatives to be "cleared," or processed by central counterparties that reduce the risk of broad market upheaval if a major trading participant defaults.
"I'd be surprised if [U.S. and European regulations] are not very similar images of each other," he said, as authorities seek to guard against traders gravitating toward more lightly-regulated jurisdictions.
The U.S. Treasury last month said it intended to exclude many currency derivatives from clearing requirements, but customized foreign-exchange options, swaps and non-deliverable forward contracts wouldn't be exempted. The Bank for International Settlements this week estimated that the level of outstanding currency derivatives trades worldwide climbed to $57.8 trillion in the second half of 2010.
"If these products are centrally cleared, some of the control that the larger institutions have on that market is going to be broken down," Kemp said. "It gives other people an opportunity to participate in those more credit-intensive products."
Kemp's move to MF Global reunites him with Richard Moore, picked by Corzine last year to oversee European operations. Both previously spent more than a decade at Citigroup (C), and Kemp will report to both Moore and Corzine.
MF Global is due to report fiscal fourth-quarter earnings Thursday.
copied from http://online.wsj.com/article/BT-CO-20110518-710701.html
The appointment of James Kemp to lead its forex push is part of the effort by MF Global Chief Executive Jon Corzine to remake the futures brokerage into a full-scale investment bank within five years.
"Some of the smaller companies involved in FX now have the opportunity to find gaps where large institutions are not covering clients in the way that they want to be covered," Kemp said in an interview Wednesday.
Corzine, the former New Jersey governor and Goldman Sachs (GS) chief, has directed MF to take the other side of client trades in markets like foreign exchange and intends to weave currency trading capabilities into a planned global platform for retail investors.
Kemp previously was co-founder and partner of Cogence Capital LLC, a short-term quantitative currency trader, which he said gives him a view into the advent of electronic trading in the $4 trillion per day forex market.
"In some areas you can compete with the universal banks because of the greater access to prices that the growth of electronic access has brought along," he said.
Broader availability to credit via prime brokerage services has allowed smaller, electronic firms to compete for currency trades against much-better capitalized giants of the business, he said.
A crop of electronic venues for trading in the spot cash market, bolstered by the influx of new forex traders, has helped develop "a more level playing field than there used to be," according to Kemp.
Regulators in the U.S., the U.K. and Europe, Kemp said, are likely to align on new requirements for certain foreign exchange derivatives to be "cleared," or processed by central counterparties that reduce the risk of broad market upheaval if a major trading participant defaults.
"I'd be surprised if [U.S. and European regulations] are not very similar images of each other," he said, as authorities seek to guard against traders gravitating toward more lightly-regulated jurisdictions.
The U.S. Treasury last month said it intended to exclude many currency derivatives from clearing requirements, but customized foreign-exchange options, swaps and non-deliverable forward contracts wouldn't be exempted. The Bank for International Settlements this week estimated that the level of outstanding currency derivatives trades worldwide climbed to $57.8 trillion in the second half of 2010.
"If these products are centrally cleared, some of the control that the larger institutions have on that market is going to be broken down," Kemp said. "It gives other people an opportunity to participate in those more credit-intensive products."
Kemp's move to MF Global reunites him with Richard Moore, picked by Corzine last year to oversee European operations. Both previously spent more than a decade at Citigroup (C), and Kemp will report to both Moore and Corzine.
MF Global is due to report fiscal fourth-quarter earnings Thursday.
copied from http://online.wsj.com/article/BT-CO-20110518-710701.html
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