SINGAPORE – By R5. London’s Affect on Asia

Some might say that FXWeek had put in a bit more effort to this year’s Asia conference compared to last - and it paid off.

First Published: e-Forex Magazine 59 / Recent Events / January, 2015

With panels ranging from regulated trade reporting and CCP clearing to electronic trading in EM and HFT in Asia. From offshore/onshore RMB to the politics and economics across all Asian currencies.

Shane Womer of IOSCO spoke of how underdeveloped capital markets provide the instability ( and therefore the profitability ) on EM flows, but that the sector has a growing reliance on non bank flows. Perhaps interesting that at time of printing – Temasek had just announced a 10% stake in Virtu.

Dimitri Galinov of FastMatch paralled the change to his early e-trading in equities at Credit Suisse. Whilst voice traders were wary of the new tools they ended up with more business and the need for more voice traders to cover it. You can’t remove the customer –but as you gain the confidence to remove the trader then you get structural change and technology is the result not the cause. With local banks seeing 10x increase in CNH trading the big growth in INR, MYR and IDR then perhaps its no surprise that the topic draws some attention.

Refreshingly some of the best quotes of the day came from the Clearing & CCP discussions. Siddhartha Roy from the Clearing Corporation of India described how daily INR clearing was 23bn but that end of month pushes it to 100bn. Turnover that many clearing houses would like to claim.

Other clearing comments in jest included “Hong Kong and Singapore are already marginalised by Shanghai clearing” and “One Pan Asian CCP is a great idea – currently that’s LCH” kept the audience amused in what is normally a fairly dry subject.

The RMB panel also gave some useful and insightful stats and comments. “FX deposits in China are the one to watch. Corporates holding USD balances worry that RMB will lose value with Fed tightening” and while more complex instruments like options were growing in use – “they’re all sellers with no buyers.” 

It’s early days now – but what will we see when the RMB turns 40?

Taiwan, Japan and Korea all doubled their real value against their closest trading partners as they emerged onto the world stage. We’ve seen RMB go from 34bn per day in 2010 to 120bn in 2014 with 240bn per day a real possibility by 2016. How long can it continue to grow at such levels ?

Interestingly – London was seen as the city to benefit most from offshore RMB expansion. Not apart from the usual timezone and turnover reasons but  unlike Taiwan and Hong Kong it is just that little further away from Bejing’s influence and control. Likely leading to more creative and innovative products and services in the near term.

I wonder if that’s the reason why Bejing has been so keen to promote London as the non Asian RMB centre? Stand by for more GBP/RMB news next year.

London was seen as the city to benefit most from offshore RMB expansion.

London was seen as the city to benefit most from offshore RMB expansion.