Investing in US Securities? Something is Stalking You …
by
FM
26 Degrees is uniquely placed to assist clients with the nuances of changing markets.
Kayaking on Sydney Harbour on a beautiful blue-sky morning in February 2023, an unnerving wave of dread swept over me. A feeling I was being stalked by something I wasn’t prepared for. Slowly, silently, edging closer and closer. Until it was right on my tail. What was coming was exceedingly dangerous … but only if I wasn’t ready for it.
It wasn’t an ocean predator.
In fact, I wasn’t worried at all about the animal following my kayak that morning. The curved dorsal fin told me it was a Bottlenose dolphin, more likely wanting to kiss me than kill me.
No, the cause of the dread that morning was the announcement from the US Securities and Exchange Commission earlier in the day that they would be reducing the settlement cycle for US Securities from T+2 to T+1. The SEC announced this halving of the time firms had to settle US Securities transactions would be implemented in May 2024. The clock was ticking for anyone trading in US Securities to ensure they were ready. For non-US persons trading US Securities, this also has a big impact on their FX hedging and overlay activities.
Our team at 26 Degrees executes billions of dollars of global equities and ETFs annually for our institutional clients. We transact billions of dollars a day in FX and metals. This was going to be a big lift for everyone in the team. We needed to update and test systems - recruit staff to handle the expected increased volumes and assist our clients in identifying the impact of, and opportunities presented by, the T+1 change.
Fast forward to today and we are ready. Clients are prepared and systems are in place to support new workflows.
Surprisingly, the biggest, and least prepared for, impact of the changes seems to be the impact on FX markets – specifically, the need for any non-US investor in US Securities to review their FX hedging activities to ensure they can cope with a dramatically reduced window for clearing any FX hedges. Market commentators are predicting that in the hours immediately after the NY close, the traditionally illiquid Sydney/Asia timezone is likely to see much greater volumes transacted, as international institutions scramble to hedge USD equities exposures after NY close, but in time to catch the CLS settlement cutoff an hour later (expected to be extended by CLS).
Deal with the dread
So – what are the main things we have learned and what should you be doing to deal with the dread?
· The changes will create an FX market “Liquidity Witching Hour” – which might be extended to three hours by the CLS.
· This timezone is traditionally the most illiquid period of the 24 hours in FX.
· Experts with experience in executing into this unique timezone have suddenly become sought after.
· Do you have FX execution expertise in Sydney/Asia? Have you researched an outsourced execution solution?
· Ensure your broker is ready, and their own workflows will allow you to settle your Securities (and FX) in time.
· Consider switching to using swaps/CFDs/synthetics to trade US Securities instead of cash. These instruments may reduce the FX exposure associated with investing in securities outside your home domicile.
Where can 26 Degrees help?
We are a technology-focused, independent prime broker with over ten years of award winning history serving Institutional clients globally. Headquartered in Sydney with a Tokyo office and Cyprus subsidiary, we are uniquely placed to assist our clients deal with the nuances of the upcoming changes, particularly the impact on FX liquidity and execution in the post-NY hours.
If you would like to know more about our industry-leading capabilities, contact us here.
Kayaking on Sydney Harbour on a beautiful blue-sky morning in February 2023, an unnerving wave of dread swept over me. A feeling I was being stalked by something I wasn’t prepared for. Slowly, silently, edging closer and closer. Until it was right on my tail. What was coming was exceedingly dangerous … but only if I wasn’t ready for it.
It wasn’t an ocean predator.
In fact, I wasn’t worried at all about the animal following my kayak that morning. The curved dorsal fin told me it was a Bottlenose dolphin, more likely wanting to kiss me than kill me.
No, the cause of the dread that morning was the announcement from the US Securities and Exchange Commission earlier in the day that they would be reducing the settlement cycle for US Securities from T+2 to T+1. The SEC announced this halving of the time firms had to settle US Securities transactions would be implemented in May 2024. The clock was ticking for anyone trading in US Securities to ensure they were ready. For non-US persons trading US Securities, this also has a big impact on their FX hedging and overlay activities.
Our team at 26 Degrees executes billions of dollars of global equities and ETFs annually for our institutional clients. We transact billions of dollars a day in FX and metals. This was going to be a big lift for everyone in the team. We needed to update and test systems - recruit staff to handle the expected increased volumes and assist our clients in identifying the impact of, and opportunities presented by, the T+1 change.
Fast forward to today and we are ready. Clients are prepared and systems are in place to support new workflows.
Surprisingly, the biggest, and least prepared for, impact of the changes seems to be the impact on FX markets – specifically, the need for any non-US investor in US Securities to review their FX hedging activities to ensure they can cope with a dramatically reduced window for clearing any FX hedges. Market commentators are predicting that in the hours immediately after the NY close, the traditionally illiquid Sydney/Asia timezone is likely to see much greater volumes transacted, as international institutions scramble to hedge USD equities exposures after NY close, but in time to catch the CLS settlement cutoff an hour later (expected to be extended by CLS).
Deal with the dread
So – what are the main things we have learned and what should you be doing to deal with the dread?
· The changes will create an FX market “Liquidity Witching Hour” – which might be extended to three hours by the CLS.
· This timezone is traditionally the most illiquid period of the 24 hours in FX.
· Experts with experience in executing into this unique timezone have suddenly become sought after.
· Do you have FX execution expertise in Sydney/Asia? Have you researched an outsourced execution solution?
· Ensure your broker is ready, and their own workflows will allow you to settle your Securities (and FX) in time.
· Consider switching to using swaps/CFDs/synthetics to trade US Securities instead of cash. These instruments may reduce the FX exposure associated with investing in securities outside your home domicile.
Where can 26 Degrees help?
We are a technology-focused, independent prime broker with over ten years of award winning history serving Institutional clients globally. Headquartered in Sydney with a Tokyo office and Cyprus subsidiary, we are uniquely placed to assist our clients deal with the nuances of the upcoming changes, particularly the impact on FX liquidity and execution in the post-NY hours.
If you would like to know more about our industry-leading capabilities, contact us here.
Suzuki Akihiko Joins Finalto Asia Pte Ltd as Head of Japan Markets
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
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#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
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Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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