A year of cost cuts and opportunities

Happy New Year! As we enter 2009, it seems many of the themes from last year are going to continue driving developments this year - that is more focus on the back office and retail FX trading.

Last week, Aite Group published a report on the costs associated with FX ticket processing. Although these naturally vary from bank to bank with the larger dealers generally more efficient than the smaller banks, in the current environment any initiatives to cut costs will likely be reviewed. Of greater interest is the clearing aspect of the business, with the likes of LCH.Clearnet putting renewed focus on clearing FX trades, having initially shown an interest in a central counterparty clearing service for FX early in 2004 (FX Week, April 26, 2004). Others thought to be looking at clearing spot FX include the CME (possibly with Reuters?).

And despite a fall in FX volumes in Q4 last year, FX still provides opportunities that equities-focused participants can leverage. Today (January 12), Nasdaq OMX Information will begin disseminating new currency spot values in support of the listing and trading of planned currency options and futures. Similarly, Henderson Global Investors plans to develop a G-10 and EM currency offering alongside its other fixed-income capabilities to provide clients with "high value-add, independent, uncorrelated investment products."

Meanwhile, changes in the OTC retail FX markets see more retail trading companies looking to become traditional banks. ACM Group suspended ACM USA's membership to the National Futures Association while it applies for a Swiss banking licence.

According to its website, ACM USA will no longer be a counterparty and will only be a licensed office to AC-Markets, assisting in the opening of FX trading accounts directly with AC-Markets and in the future with ACM Bank. AC-Markets cannot accept US customers until the approval of its banking licence, said the note.

Similarly, Saxo Bank expanded its private wealth footprint by acquiring Danish stockbroker and wealth management company Sirius, which has a management portfolio of more than e670 million and will operate as a subsidiary of the Danish bank.

And, despite rumours, Graham Wellesley, chief executive of ODL Securities is in expansionary mode, with plans for two joint ventures opening foreign offices and a large piece of business being transferred from another institution. He said: "ODL will be profitable this year - our bad debts have been minimal in the extreme. Although we did have a difficult period of time within our equity market-making business early in the crisis, that has now been rectified. That business is cashflow positive and generating positive revenues and profits on a monthly basis, and has been for many months now. The company has performed well throughout the crisis.

"We as a board are considering our options to raise additional capital but only to fund future expansion in enlarging the group. If we were to raise money for an expansion, it would be somewhere between £10-25 million."