e-Forex Magazine | e-Forex Interview | A man with a unique view of the global FX market
e-Forex Interview : A man with a unique view of the global FX market
First Published in e-Forex Magazine July 2009
Derek Sammann, Managing Director, Global Head of foreign exchange at CME Group
Derek, you've worked in foreign exchange for
over 18 years and been at the heart of the business as it has
successfully adapted to many exciting and rapid developments in
technology and operations over that period. What do you see as
the key challenges the industry faces today?
Having spent 16 years working in Paris and London globally
running an FX Options and Structured Products for a French
investment bank, and now having spent almost 2 ½ years
running global Foreign Exchange for CME Group, I feel that I have
a unique view on both the opportunities as well as the threats to
the global FX market today. While this market has demonstrated
tremendous growth rates over the past 10 years driven in large
part by technology and electronic trading, the key challenge we
now face is how to deliver sustainable growth rates in such
challenging market conditions.
Probably the most important issue facing the global FX market is
access to credit, which is the life blood of not only the Spot FX
market, but even more critical to the Forwards, Swaps and FX
Options markets. Without access to sufficient credit, FX market
participants find that access to counterparties quickly
constricts, leading to a decrease in global liquidity with the
attendant widening of spreads and decreased depth of book. Prices
become more volatile, and it becomes more difficult to enter and
exit trades without moving markets.
Concern over counterparty risk is widespread throughout the
industry, as illustrated in a recent poll. CME Group's annual
survey showed this concern growing among banks, which cite
counterparty risk as their biggest worry when supplying
e-pricing, up to 84 percent this year, from 72 percent last year.
By contrast, only 16 percent regarded latency as a concern, down
from 19 percent in 2007. So you see concerns shifting away from
"how can I do business faster?" to "how can I do business more
safely?".
