Loss of Credit Appetite Driving Up Technology Costs

The final countdown to the Finance Magnates London Summit is on and ahead of the event itself a number of contributing panel participants and speakers are speaking about their respective roles and perspectives in the industry. Per its latest interview, Finance Magnates spoke with Marco Baggioli, Executive Managing Director and Global Head of Brokerage at ADS Securities, who touched on the shifting state of the FX industry.

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What is your position and what does your role entail?

Since my appointment as Executive Managing Director - Global Head of Brokerage, I’ve been focused on leading a strategic transformation of our business. The ADS Securities story is unique: in just six years, it has grown from an ambitious start-up FX broker in to a global player in financial services. But just as we have evolved so too has the industry, and so it is imperative that we regroup and refocus.

We have taken a deeper, honest look at our brokerage business: the services we offer, how we are structured and the way in which we operate. I’ve been working with our senior management team to realign our existing structure to chart a new course, taking into account the changing markets, client needs and expectations, our maturity as an organization, and this challenging cost environment.

We must be more effective, more agile and build on our core strengths and capabilities in order to succeed in this rapidly evolving global marketplace.

What was the single most important event or development that the market has seen in 2016?

There has been dramatic shift in the way the global industry looks at FX as a business line. We have seen a reduction in the credit appetite of traditional credit providers. Access to and the depth of Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term from both traditional and new Liquidity Providers Liquidity Providers A liquidity provider (LP) constitutes either individual and/or institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as the both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profi A liquidity provider (LP) constitutes either individual and/or institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as the both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profi Read this Term has changed. The cost of developing technology has increased significantly.

And perhaps most importantly, we have seen a transformation in the service expectations from clients. As challenging as these changes may seem, I see them as a unique opportunity for well-established players like ADS Securities to take a leadership role in steering clients—as well as the industry as a whole—towards developing a better understanding of how value is generated and what is worth paying for.

There is a growing gap in understanding where the industry is going

What are the biggest challenges that the FX trading community is facing? How do they affect your field?

There is a growing gap in understanding where the industry is going. Many players have either unrealistic or dated expectations of what services they should be receiving and the costs associated with them. I believe strongly that we must reach a shared consensus that reevaluating the FX value chain is not just fundamental to the success of our respective businesses, but to the survival of the industry as a whole.

What is the main message you’d like to convey to London Summit delegates?

We need to be paying greater attention to the products and services that are valuable to both our businesses and our clients, rather than focusing on those that are ‘nice to have’, oversupplied and unrealistically priced. We are in unprecedented times, and need to adopt a much more prudent approach to what we spend our money on.