Euromoney FX Survey. Methodology and FAQs

Transcription

1 Euromoney FX Survey Methodology and FAQs

2 The Survey Aims The Euromoney FX survey is the most comprehensive representation of: The wholesale FX consumption universe and FX consumption volumes Market share for individual FX providers The above in granularity when split out by FX product, market participant type and geography The data generated from the survey has proven to be a valuable tool for all FX market participants and whilst each annual survey provides a snapshot of the previous 12 months of FX market activity Euromoney recognises the value in the time series of historic data and thus endeavours to ensure that the data is comparable across different years. Core Methodological Principle To be able to most effectively provide the data to the market the Euromoney FX Survey seeks to capture all FX liquidity consumption activity from the consumers themselves. To this end interbank trading is EXCLUDED from the survey. Page 1

3 Voters and Eligible Volumes Pure Wholesale Market Consumers Hybrid Market Participants Anonymous aggregators of liquidity consumption The vast majority of respondents to the Euromoney FX Survey are consumers only in the wholesale FX market. These institutions are all eligible respondents to the Euromoney FX Survey. These respondents are typically: Non- Financial Corporations Real Money Asset Managers Insurance Companies Asset Owners (Pension Funds/ Endowments/ SWF) Leveraged Funds/ Hedge Funds Non Market Making Banks (Trust Banks/ Central Banks) Therefore 100% of the volumes of these respondents would be recognised as consumption and be eligible to be included provided that verification is satisfactory (see next page for verification process) Some respondents to the Euromoney FX Survey act as both consumers and providers of liquidity in the FX markets depending on the situation and often product. In these cases only the LIQUIDITY CONSUMPTION activity of these respondents would be deemed as eligible: These respondents are typically: Banks with market making activities Retail Aggregators With these respondents Euromoney has to satisfy itself through its verification process that it is receiving volumes that represent LIQUIDTY CONSUMPTION ONLY. Through this process Euromoney will often adjust the volumes originally submitted in consultation with the respondent. Although much of this activity will be on a pass through basis ie. the ultimate consumer of the liquidity is a third party there is an actual transaction between the provider and the respondent, risk is warehoused (possibly only briefly) and hence is eligible volume for the survey. A small number of respondents to the Euromoney FX Survey are not in themselves liquidity consumers at all but act as a conduit or aggregator for end consumers to access the FX markets. These respondents are typically classified as: FX Trading Platforms (anonymous) Agency Brokers As the trading through these types of venues/ conduits is anonymous the liquidity consumers on these venues cannot respond to the survey as they cannot name the liquidity providers they are consuming from. Therefore when either of these types of institutions responds to the survey they are in effect aggregating the volumes transacted by the liquidity consuming users on their behalf. Therefore volumes supplied by these institutions is eligible for inclusion. Page 2

4 INELIGIBLE Voters and Volumes Ineligible Aggregators A small number of respondents to the Euromoney FX Survey are not in themselves liquidity consumers at all but act as a conduit or aggregators for consumers to access the FX markets. INELGIBLE examples would include respondents typically classified as Interdealer Brokers As Euromoney seeks to measure FX LIQUIDTY CONSUMPTION ONLY and explicitly excludes Interbank trading responses from Interdealer Brokers will be deleted FX Trading Platforms (Interdealer) Certain FX Trading Platforms act as venues for interbank trading. As Euromoney seeks to measure FX CLIENT LIQUIDTY CONSUMPTION ONLY and explicitly excludes Interbank trading and hence responses from these institutions will be DELETED FX Trading Platforms (named) If Euromoney receives responses from FX Trading Platforms where the counterparties are named to each other then Euromoney will DELETE these volumes on the basis that it could be double counting activity that may be submitted by the consumer themselves Respondents from FX Provider Groups Where Euromoney receives a response from an entity that is a part of a group that is also a provider (majority owned or management contract in place) it will DELETE volumes assigned to the related provider ONLY. EXCEPT where the group member is a third party asset management divisions as the asset manager acts as a fiduciary to its clients and the assets it manages and thus is legally obliged to seek best execution for its investor clients Therefore the below functions will have volumes for their related FX providers ONLY, DELETED Treasury Private Bank Prop. Trading Desks (any asset class) Sales/ Trading Desks (any asset class) Custody Operations Banking Functions (Cap Marks/ M&A) Whilst Euromoney appreciates some or all of the above may operate on an open architecture basis in any given bank it must put in place a policy that applies to all and hence uses the Fiduciary Rule as its guiding principle Page 3

5 Volume Definitions What Euromoney collects from respondents The Euromoney FX Survey collects trading volumes and qualitative assessments of providers from survey respondents. The volumes it requests from respondents is: Annual FX trading volume of previous calendar year- see right hand box for quantification Per Provider: Spot/Forward % that is Electronic Swaps (Single Leg) % that is Electronic Option (Notional) % that is Electronic % of the TOTAL above that involves EM Currencies (minimum one side of the trade being any non G-10 currency) Eligible FX Products Euromoney defines FX products as the below executed in any currency pair: Spot FX Forward FX FX Swaps (greater than one week) FX Options Products that Euromoney does NOT consider to be FX: Cross Currency Swaps Interest Rate Swaps Interest Rate Options/ Swaptions Quantifying FX Options Euromoney collects NOTIONAL volumes from respondents. To be able to combine option volumes with those of spot, forwards and swaps Euromoney delta hedges the notional volumes to get to a DELTA HEGDED figure- this is the volume figure that is published. The delta applied to the notional volumes is the median delta dealt in the market for the survey year. Page 4

6 Verification of Voters and Volumes Respondents then have their votes verified by Euromoney via telephone/ to ensure that: The respondent is who they claim to be and did indeed complete the survey That figures are in USD, reflect calendar year 2017 trading Are the swaps 1-legged or 2? That if they are a PRIME BROKED then they have not simply submitted PB volumes, that volumes submitted reflect executing brokers If they are a respondent from an institution with multiple respondents that their volumes do not overlap with those of a colleague that has also responded. If they are a bank then the volumes incorporate price taking action only- and not market making activities If they are an intermediary between end users and market makers that it is on an anonymous basis so that Euromoney will not double count any activities If volume differ wildly from previous years then the reasons for this Euromoney relies on data supplied by clients themselves ONLY we do not reference any bank provided data The only employees of FX PROVIDING GROUPS that may vote 100% freely- including for their own related FX Provider- are those in an asset management division that handles third party assets as a fiduciary- see page 3 right hand box for further details. All others will have the volumes assigned to their in-house FX providers DELETED. Euromoney conducts IP checks (all respondents are cookie d)- for multiple responses from 1 location and responses coming from Bank IP s/ buildings housing many banks ie. ORQ Singapore as a means of ensuring response integrity Page 5