Steve Grob, DerivSource, Examining the New Business Models for FCMs in the Evolving Derivatives Industry, here. Found this through the OTC Space Weekly Round up of the News, here. Take a look at the OTC Space main page, here. Pretty slick, right?
A recently published whitepaper by Fidessa entitled “You Only Live Twice, examines how FCM business models are changing as a result of new financial regulation. Fidessa’s Steve Grob explains the challenges FCMs face as they adapt workflow and technology to align with these new business models.
Q. What were the main drivers behind the report?
A. The paper assesses how futures commission merchants (FCMs) will need to make considerable changes to their business models in order to meet the challenges of impending derivatives regulation. This is a realisation that started to emerge at the back of end of last year and has only grown stronger in 2013. We believe it will be one of the main themes of 2014. One of the problems is that many FCMs have business models that are based on old market structures and are reliant on being able to simply intermediate between clients and liquidity. However, the move to multi-lateral trading and central clearing in swaps means these old business models will not work in the future. There was a hope that markets would have returned to normal but I think there is now a recognition that this will not happen.
Q. What have been the main reasons behind the trends?
A. Regulation such as Dodd Frank, EMIR, MiFID II are the main reasons behind these changes. They are all in different ways trying to make the Over-the-Counter (OTC) world look more like the exchange-traded derivatives (ETD) world. However, what the regulators have overlooked is that the OTC and ETD workflows have evolved differently and as a result, many market participants have multiple internal and external systems, which do similar things due to a rush to win clearing mandates in the past. FCMs also run multiple desks with different trading application, which can add significant expense.
It hasn’t though just been about the regulatory reforms. FCMs would have been forced to change their models because the interest rate environment has changed and doesn’t look like it will be rising significantly in the near future.
ISDA, Finextra, ISDA moves to automate rate-setting for ISDAFix benchmark, here.
As part of these changes, ISDA will be standardizing the polling process across currencies. On January 27, 2014, Thomson Reuters, which has served as the collection agent for all non-US dollar ISDAFIX rates, will take on the USD process. Once Thomson Reuters has taken on the USD process, it will work with panel banks to change the polling window length across all main currencies to 10 minutes from the current range of five to 59 minutes.
In addition, ISDA is in the process of making a number of other improvements to the rate:
ISDA has clarified the definition of ISDAFIX to emphasize that contributing banks should use executable bid/offer rates. The definition includes a table referencing typical contract sizes for each market in order to provide a reference point for all banks and ensure consistency.
Work is under way to establish an ISDAFIX Code of Conduct and an ISDA Oversight Committee, which will address internal governance, systems and controls so as to maintain the highest standards and professional reputation for ISDAFIX and contributing banks and to comply with the IOSCO Principles for Financial Benchmarks.
Reinders and Jeffers, Intel Xeon Phi Coprocessor High Performance Programming, here.
As of today – the book is in final production steps… we have proofreading to do still, but everything is in the production department at Morgan Kaufmann – on track to see books in February 2013.
As a teaser – here is the outline for the book:
Chapter 1 – Introduction
Chapter 2 – High Performance Closed TrackTest Drive!
Chapter 3 – A Friendly Country Road Race
Chapter 4 – Driving Around Town:Optimizing A Real-WorldCode Example
Chapter 5 – Lots of Data (Vectors)
Chapter 6 – Lots of Tasks (not Threads)
Chapter 7 – Offload
Chapter 8 – Coprocessor Architecture
Chapter 9 – Coprocessor System Software
Chapter 10 – Linux on the Coprocessor
Chapter 11 – Math Library
Chapter 12 – MPI
Chapter 13 – Profiling and Timing
Chapter 14 – Summary
We expect that to come out just over 400 pages.