Acting chairman Caroline Pham has criticised the CFTC’s inaction when concerns were raised about the commission’s handling of the Traders Global Group case.
In August 2023, the CFTC filed a complaint against Candadian FX broker Traders Group Global, also known as My Forex Funds, noting that CA$31.5 million had been transferred to an unidentified account belonging to CEO Murtuza Kazmi between December 2022 and April 2023. These funds were, in reality, tax payments to the Canadian tax authorities.
This week the case was dismissed, with the court’s report stating: “The CFTC, as one of the primary prudential regulators in the United States, has an obligation to discharge all of its obligations – statutory, regulatory, and ethical – faithfully. It also unquestionably has a duty of candour to the Court. However, at almost every stage in this case, the CFTC failed in this regard.”
On the announcement Pham said: “The CFTC engaged in willful and bad faith conduct by making multiple false statements to the Court and other ‘numerous instances of sanctionable behavior’ over the course of a year. This is inexcusable.”
She went on to criticise previous CFTC management, stating: “I first raised numerous concerns about CFTC conduct in this case nearly two years ago – even before the complaint was filed, and again during the litigation when I reviewed CFTC emails evidencing management efforts to conceal the false statements from the Court.
“The CFTC not only disregarded my serious concerns and an oversight letter from a member of Congress, but also engaged in a malicious campaign of retaliation and defamation designed to impugn my character and integrity.”
Pham drew attention to recent changes she has made in the Division of Enforcement since being appointed acting chairman in January, including the introduction of public guidelines to encourage self reporting, new policies to reduce regulation by prosecution, and a redistribution of resources to tackle more serious cases.
“I also want to commend our new Director of Enforcement, Brian Young, for taking immediate and proactive steps to promote an ethical culture and enhance continuing education and training opportunities for our enforcement staff to make sure this conduct never happens again, and the CFTC adheres to the highest standards,” Pham added.
“The CFTC must now accept accountability so that appropriate corrective action can finally be taken to address the conduct issues, and the CFTC can put this behind us and move forward to restore the agency’s credibility and reputation.”
Franck Noel, head of strategy, risk and transactions, Deloitte
EU member states accepted the European Council’s proposal for the shortened settlement cycle on 7 May, with the amendment that securities financing transactions will be exempt. These transactions are non-standardised, and introducing an obligation to clear on a T+1 basis may be unfeasible, the Council agreed.
Franck Noel, managing director in the strategy, risk and transactions department at Deloitte, told Global Trading: “Whether this exemption will significantly change the workload remains uncertain. SFTs are often tied to bond ownership, meaning that if institutions use SFTs on their assets, they will still need to review their processes and value chain to ensure compliance with T+1 settlement requirements. Additionally, recall procedures will need to be accelerated to accommodate the shorter settlement cycle.”
The exemption is something that has been widely requested by market participants, he said. SFTs typically settle on a shorter timeline than their underlying trades, he said, and require greater flexibility in a T+1 landscape. Additionally, the fact that SFTs are not explicitly excluded from the Central Securities Depositories Regulation (CSDR) could lead to confusion.
In its statement, the council clarified: “The exemption only applied to SFTs documented as single transactions composed of two linked operations.”
Europe will move to a T+1 settlement cycle on 11 October 2027, following negotiations between the European Council and the European Parliament. The transition date was initially recommended by ESMA last November.
In its report to the UK Government, the Accelerated Settlement Technical Group recommended that SFTs be made exempt from T+1 requirements and called for greater legal and regulatory clarity around the instruments.
“There is a significant share of SFTs that are executed for a settlement date later than the standard settlement cycle, a trend that is expected to increase in both repo and securities lending markets. Restricting the ability of UK trading venues to offer participants the possibility to execute these transactions would risk driving this activity away from those venues.
“The current scope of UK CSDR in relation to SFTs is ambiguous and this has caused confusion and regulatory uncertainty in the context of the move to T+2. The transition to T+1 provides an opportunity to rectify the situation by providing clarity and legal certainty in relation to the treatment of SFTs, especially as SFT markets are becoming increasingly electronic.”
In recent years, numerous concerns have been raised about the feasibility of Europe moving to a T+1 environment.
“Compared to a year ago, we’ve seen a complete shift. Now, there is no room for hesitation,” Noel said.
“In my view, the main changes have been a clear political commitment to making this transition happen in Europe, regardless of challenges, and the agreement on a common implementation date with the UK and Switzerland, which was widely expected by the market.”
“I still believe the transition presents significant challenges for all stakeholders, such as operational processes adjustments (like accelerated affirmation and the need to revamp settlement processes with more automation), liquidity issues, cross-border trades, ETF and securities lending impacts and more. But now the deadline is set, so we need to move forward on a full analysis of these complexities involved by the fragmentation of the European market and the necessary adjustments to the multiple post-trade infrastructures across the region.”
On the announcement, Andrzej Domanski, Polish minister for finance, suggested that a move to T+1 will support the European Union’s broader goals.
“A shorter settlement cycle of one day will make our capital markets more efficient. This is a concrete step to give heed to the calls to boost the EU’s competitiveness,” he said.
Improving European competitiveness is a priority of the union, particularly following the Draghi and Letta reports published in 2024. Other efforts made in this space include the simplification of listing in European markets and the introduction of the savings and investments union (SIU), designed to incentivise retail investment in the region.
While the move to T+1 will close the gap with the US market, Noel does not believe that a shortened settlement cycle will particularly help achieve this goal.
“Since T+1 is becoming a mandatory feature rather than a competitive advantage, it won’t necessarily provide an edge—but not adopting it would be a disadvantage,” he noted. “By realigning settlement cycles Europe will benefit from reduced counterparty risk exposure, enhancing market stability, and improved liquidity, as investors will access funds more quickly.”
“Only the regulatory deadline provides the necessary incentive to ensure timely execution. So, now that we have a common date In Europe, we must plan and assess in 2025, implement in 2026, and test in 2027 to ensure a smooth transition,” Noel concluded.
Large technologically-powered market makers are increasingly visible in equity markets, and buyside participants praised the liquidity they provide.
Emerging from their secretive prop trading roots, large market making firms have joined the mainstream, either as electronic liquidity providers (ELPs) or systematic internalisers (SIs), according to buyside panellists at TradeTech Europe.
“SIs just offer something that probably some dark multilateral trading facilities (MTFs) do not offer”, said Fabien Oreve, head of trading at Candriam Asset Management. “It’s just immediacy of execution. Sometimes we need to trade as an emergency and SIs offer that liquidity immediately”.
Fabien Oreve, head of trading at Candriam Asset management
Buyside stakeholders at Tradetech lined up to confirm that the liquidity is both genuine and welcome.
Mike Poole, head of trading at Jupiter Asset Management said, “If you choose the right venue for the right order, counterparty selection and toolbox breadth matter more than any single market‑share statistic.”
Mike Poole, head of trading at Jupiter Asset Management
Fellow panellist Kavel Patel of BMO Capital Markets supplied further arguments: “Client analytics now show investors will trade on lit books, periodic auctions or SIs so long as price impact is low.”
Anish Puaar head of market structure at Optiver
The panel noted that seven large, non‑bank electronic market‑makers dominate EU equity liquidity provision.
Matt Clarke, head of EMEA distribution at XTX Markets, said, “High infrastructure and capital costs will deter new entrants.”
He noted that the issue is scale, not oligopoly.
“Two sophisticated parties willing to trade define true price; everything else references that,” he said.
Clarke argued that for liquid megacaps the system can tolerate sizeable off‑book prints, whereas thin small‑caps “really do suffer” if on‑exchange volume halves.
The debate also focused on transparency and operations. Anish Puaar, European head of market structure at Optiver reminded regulators that his firm hedges bilateral risk “via correlated stocks, futures, options; that activity returns to screen markets,” warning that blunt caps on bilateral trading could “backfire if they ignore execution quality.”
He also suggested further academic research should take place to uncover the potential impacts of market maker activity on the market.
Buyside delegates, for their part, asked for better post‑trade flags rather than hard venue quotas, a plea repeated by several speakers across the two panels.
For now, the verdict from Europe’s largest asset managers like Candriam and Jupiter is clear: the liquidity SIs and ELPs deliver is visible, addressable and often decisive—especially in stressed markets. Whether that remains compatible with healthy price discovery, panellists agreed, depends less on market‑makers growing dominance than on sharpening pre and post trade data.
Matt Clarke, head of EMEA distribution at XTX Markets
Clarke stressed that systematic‑internaliser (SI) activity is large but anything but secret.
“We rely on lit exchanges for price formation, but bilateral SI flow is exploding — north of €1 billion a day for us,” he said, adding that the venue’s curated streams let traders show size privately without distorting the screen — “block opportunities I can’t show on lit books.”
Market makers insisted that it was all part of a virtuous circle where they could absorb risk across their balance sheets.
According to Optiver’s Puaar, “What we do bilaterally doesn’t affect our on-screen strategies. They’re two distinct things. When we trade bilaterally, the liquidity doesn’t specifically disappear into thin air. We have to manage that position, unwind that risk. That that means for us is that we’ll trade out a position using correlated assets, using the stock itself. We’ll skew our option pricing we’ll provide liquidity and ETFs as necessary. So there’s still a large element of on screen trading related to our bilateral trading”.
Muriel Faure, chair, Technological Innovations Commission at Association Francaise de la Gestions d’Actifs (AFG)
European IPOs and engagement with EU and UK public markets have floundered in recent years. However, unpredictability in the US and the purported end of US exceptionalism have left many keen to rebalance their investments – providing an opportunity for Europe to claw its way back onto the world stage.
Muriel Faure, chair, Technological Innovations Commission at Association Francaise de la Gestions d’Actifs (AFG)
A common buyside view is that public listings are unattractive. “European companies want to stay private because when they go public, their valuations go down,” said Muriel Faure, chair of the Technological Innovations Commission at French buy-side body Association Francaise de la Gestions d’Actifs (AFG). Venture capital and private equity firms are able to offer appealing liquidity and funding to companies, which disappears when they IPO.
Bjorn Sibbern, CEO, SIX.
A recent report from New Financial and HSBC referenced by panellists observed that more than US$1 trillion was lost from public markets in the last decade as companies were bought up by privately held or private equity firms.
Bjorn Sibbern, CEO of SIX Group, dismissed fears that European IPOs are being lost to the US – observing that the two largest IPOs of 2024 were listed on Swiss and Spanish exchanges.
The London Stock Exchange’s Ayuna Nechaeva, head of Europe primary markets, countered the idea that firms are disadvantaged when they go public in the UK and Europe. “Firms go public to gain access to ongoing liquidity and continue their capital raising,” she commented.
The role of retail investors in driving IPO engagement was according to Sibbern, citing his previous role at Nasdaq Nordics. “Retail investors need to be part of the listing process because then you get a flywheel effect. That’s what we learned in Sweden,” he said, which has seen IPO growth over recent years.
Nechaeva commented that investor participation should be encouraged at the point of IPOs. Changes to the listing act in the UK are driving interest in IPOs, she added, and highlighted the PISCES initiative – which allows firms to intermittently access public capital.
PISCES was also referenced by Jon Relleen, director of infrastructure and exchanges, supervision, policy and competition for markets at the Financial Conduct Authority, along with other UK initiatives to draw companies back to UK public markets.
Jon Relleen, FCA.
“We need to be careful that we’re not overly negative. London and the UK are really thriving in many asset classes, particularly fixed income,” he commented. “We’ve had lots of reviews on this, and it’s a big focus with the current government. We’ve changed the listing rules, and we’re reforming the prospectus regime. The EU is doing something similar. We’re listening to market participants about where they see frictions and working to reduce that.”
He was careful to add that private markets do have a role to play in the market. “We don’t want to see it as a competition between public and private markets,” he noted. “Ultimately, we care about the ability for companies in a real economy to raise capital, to drive growth and innovation. Companies should face different options in how to go public.”
Simon McQuoid-Mason, SIX.
Simon McQuoid-Mason, head of equity product and quant research at SIX Swiss Exchange, added that Europe has a number of selling points for companies wanting to go public. “The diversity of the region brings new ideas,” he commented. “There’s decentralised capital, as a contrast to the concentration in the US. The challenge is pulling together and providing access to that capital pool.”
Simon Gallagher, Euronext.
“We need more razzmatazz in Europe,” said Simon Gallagher, CEO of Euronext London and head of global sales. “We’re stuck in a doom loop at the moment with the slow pace of IPOs.” Just how to bring the sparkle back to public markets will take a combination of regulatory, structural and mindset adjustments, panellists agreed.
On further incentivising IPOs, Faure floated the idea of digital IPO platforms and tokenised IPOs to make it easier for companies to go public. On a regulatory basis, “there is an opportunity to make the process simple and quick”, she said. “Europe needs to work towards having less CSD and exchange fragmentation, more interoperability, and a change of mindset.”
Huw Gronow, head of dealing, Newton Investment Management
After years of enviously looking at the US, panellists at TradeTech urgently called for changes to tax rules and investor education, to unleash a wall of retail equity flow.
Emma Lokko, Susquehanna.
Panellists at this year’s TradeTech Europe conference called for an end to over-protective regulation of retail. “One of the things that I often hear is that retail should only be playing trading simple products, and that they weren’t sophisticated enough”, said Emma Lokko, head of European market structure for market maker Susquehanna. “I think it’s really important that self-directed retail investors should be allowed to trade what financial instruments they see it is appropriate for them, given their risk appetite and their hedging requirements”
Others put forward a series of changes that should be made to European markets to encourage greater retail investment – something which is already on the rise, according to Emilie Rieupeyroux, head of market strategy, for cash equity and data services at Euronext.
She noted that retail weight on the platform has increased by 20% in the last two years, with the number of end retail investors monitoring the firm’s market data feeds doubling each year for the past four years. Recent volatility has further boosted retail interest in European stocks as confidence in the US market has become shaky, Rieupeyroux added.
Huw Gronow, head of dealing, Newton Investment Management
Huw Gronow, head of dealing at Newton Investment Management, prioritised the need for education, advocating for personal finance to be added to the national curriculum. He also suggested that industry, government and regulatory bodies bring in incentives to encourage retail participation. “Anything that encourages an investment culture is good,” he said.
Elsewhere, changes to tax programmes were strongly advocated for. Alex Dalley, head of European cash equities at Cboe Europe , called for a European tax-efficient savings product to be mandated, while transaction exemption tax and the elimination of stamp tax – which has already been introduced in the UK and Switzerland – were suggested by Rupert Fennelly, EU head of equities electronic trading and sales at Barclays.
Simon Gallagher, Euronext.
Although retail interest is growing, overprotective regulation and a lack of incentives are still preventing retail investors from fully engaging in the equity markets, panellists said, a discouragement of risk-taking behaviour driven by post-2008 regulations.
“You can’t protect everyone,” argued Simon Gallagher, CEO of Euronext London and head of global sales. “you have to accept that 1/10 investors will lose. Regulators need to let that happen. We need to bring more risk into the system.”
Jon Relleen, director of infrastructure and exchanges, supervision, policy and competition for markets, Financial Conduct Authority
Batting away responsibility, Jon Relleen, director of infrastructure and exchanges, supervision, policy and competition for markets at the Financial Conduct Authority suggested that encouraging risk is not just the role of regulators – tax regimes and exemptions need to be taken into account, along with listing rules and the prospectus regime for companies going public in European markets. Governments and exchanges also have a role to play.
Rupert Fennelly, Barclays.
“We need to give people the right kind of advice, encourage them to take those risks. That’s a difficult thing to do. Regulation is not a single bullet – we need to look at this holistically, bringing in market venues and the sell side,” he said.
Fennelly agreed here, arguing that governments don’t need to bring in reforms, but instead must push for a more pro-investment culture. He drew attention to the public float of British Gas in the 1980s, and advocated for a similar, sustained campaign to change the current landscape.
Robert Miller, Kepler Cheuvreux.
While confidence in the US markets is not quite as strong as it was last year, Robert Miller, head of market structure and liquidity solutions at KCx, observed that the reduction of friction when investing cross-border means that European investors are still more likely to invest in household-name US stocks than domestic. The tendency to ‘outsour
ce’ retail investment to pension funds and the like in Europe, Simon McQuoid-Mason, head of equity product and quant research at SIX Swiss Exchange, added, means that end retail clients are not familiar with successful domestic companies.
In countries like the US and China, where pensions are not provided by the state, the general public are incentivised to invest in equity markets –
Simon McQuoid-Mason, SIX
doing so is a cultural norm, and not doing so could result in a lack of security later in life.
Relleen advocated for a more US-type structure to be adopted, with a reduction in investor protections – to a safe degree.
Without a major cultural change in attitudes to retail investment, along with structural changes to support them, retail investment may stagnate.
Daniel Ciment has been named Americas head of equities trading and execution at BNY amid a restructuring of the division.
Based in New York, he reports to Rob Lynch head of fixed income and equities.
John Goodheart, who held the role on an interim basis, will remain global head of fixed income and equities product.
The appointment follows the news that BNY exceeded the value at risk (VaR) threshold of its overall portfolio on a single day in the first three months of 2025, with a daily trading loss greater than US$3.2 million.
BNY did not comment on the loss.
The firm exceeded VaR once in 2024, in the final quarter of the year.
Ciment has 30 years of industry experience, holding senior roles including president and chief operating officer of Elwood Technologies, chief operating officer of IEX Exchange and global head of equities electronic trading at JP Morgan during his career. He has been a freelance electronic trading consultant for the past year.
Citadel Securities has called for more scrutiny around market data fees, arguing that costs are currently “excessive”.
The company states that market data fees, which make up a large proportion of exchanges’ revenues, are inflated. This increases the barrier to entry for smaller broker-dealers, increases costs for investors and ultimately misaligns with fairness requirements in the Exchange Act, it says.
Under the Exchange Act, modified by the Dodd-Frank Act, member fee changes can be established with immediate effect once self-regulatory organisation (SRO) documents are filed. These filings do not have to be approved by the SEC to become active, and exchanges can retract and refile repeatedly until they collect the relevant fee, Citadel Securities says.
The Dodd-Frank modification should be rescinded, Citadel Securities argues, as it allows exchanges to file fee changes with impunity and without oversight.
The company’s complaint echoes the report from Market Structure Partners on data costs in Europe earlier this year.
Filings from US exchanges illustrate the growing profits being made from market data fees.
In the first three months of 2025, revenues for Nasdaq’s data and listing service was up 3% year-on-year (YoY) to US$192 million. At ICE, data and network technology revenues were US$172 million – up 6%. Cboe reported “a decline in industry market data fees” for its North American equities business in the first quarter, but reported the greatest revenue increase of the three exchanges – an 8% YoY gain, reaching US$77.8 million in market data fee revenues over Q1 2025.
The pieces are falling into place for the US to move to 24-hour trading as major industry bodies prepare for the move. However, Citadel Securities has called on the SEC to introduce more consistent rules around the new operating structure.
Earlier this month, the transaction securities information processors (SIPs) Operating Committees announced that it plans to extend its operating hours to a 24-hour model. A ‘technical pause’ of less than an hour has been built into each 24-hour cycle, allowing all involved parties to refresh their systems at 8pm ET. As such, a new trading day will begin at 9pm ET – 2am in the UK.
Once submitted to the SEC, plans for the amendment will be accepted or rejected within 300 days.
In a recent letter to the SEC, Citadel Securities stressed that a number of regulatory and infrastructural issues need to be addressed before 24-hour trading can be effective. For the former, “handling requirements, execution quality disclosures and volatility controls must be clear, fit for purpose and consistent across venues,” it says.
On the infrastructure side, key players such as the Depository Trust & Clearing Corporation’s (DTCC) National Securities Clearing Corporation (NSCC) and services including SIPs and transaction reporting facilities must be reliably available during trading hours.
SIPs have highlighted three prerequisites for their extended hours to be adopted. The first of these, for DTCC to offer clearing over the 24-hour cycle, are already in motion. Earlier this year, the group announced that 24/5 clearing for the NSCC would be effective from Q2 2026.
Additionally, SIPs says, processors must be technically able to disseminate all quotes and trades during the operating hours. The group intends to ask the SEC whether the extension of trade reporting facility operating hours to allow this will be a prerequisite for its 24-hour model.
Finally, the group states that the listing markets must be able to support the 24-hour model as processors will need to change symbol directory messages.
Jeff Kimsey, chairman of the SIP Operating Committees, commented: “We know the industry is eager to move toward 24-hour trading, and the SIPs are determined to make the changes necessary to make available the market data that will facilitate that.”
Dates for the 24-hour implementation will be determined once regulatory and technical requirements have been met.
Citadel Securities also emphasised the need for trade date and settlement date assignments during overnight sessions to be consistent across the market.
The SIPs Operating Committees, Cboe and NYSE declined to comment on Citadel Securities’ statements.
The drive for institutional 24-hour trading is in part the result of growing competition from retail brokers like Robinhood and Interactive Brokers, which allow clients to access US stocks on a 24/5 basis, and a comfort with 24/7 cryptocurrency trading. International investors are also keen to access the US equity market outside of standard trading hours.
In recent months, Cboe, NYSE and Nasdaq have all announced plans to extend their trading hours. Challenger exchanges like 24X National Exchange have built themselves with 24-hour trading in mind.
Equity traders have a significant toolkit to hedge FX risk, but which strategies are proving optimum for managing currency exposure? Gill Wadsworth reports.
The great migration of equity allocations across borders has been in evidence for decades. Investors cognisant of the risks of having too many of their eggs in a domestic basket have long sought the relative refuge of global equity mandates to bring a geographic spread to their portfolios.
And so this trend continues. According to the Schroders Global Investor Insights survey 2024, 55% of pension funds expect to increase their global equity allocation, away from pure domestic holdings, for the next one to two years.
Notwithstanding the potential exposure to a dominant handful of US stocks, opting for a global equity mandate is a neat way to access overseas return, but with this return comes currency risk as FX fluctuations can significantly impact portfolio returns.
But the decision to hedge that FX risk is not always an easy one. Equity returns are inherently volatile, and currency movements often interact with them in complex ways rather than remaining independent.
From a short-term risk perspective, it might make sense to adopt low FX hedge ratios of equities from relatively safe haven areas such as the Swiss franc, Japanese yen and US dollar which tend to appreciate during periods of equity market selloffs, providing an offsetting effect. Conversely, it is theoretically optimal to apply higher hedge ratios for currencies from relatively risky regions, as they are more likely to depreciate during market downturns.
Florent Herelle
Florent Herelle, Head of Derivative Overlay, at L&G’s asset management business, says: “Typically, the currency profile – hedged or unhedged – of an equity portfolio is inherently linked to the investment objective of that particular portfolio. For example, an index fund tracking a currency hedged benchmark will currency hedge the non-domestic equity holdings according to the benchmark index methodology.”
He continues: “We find that views on currency profile typically sit at the strategic asset allocation level – such as allocating between currency unhedged and currency hedged funds – rather than the individual portfolio level. It is common for the non-domestic equity allocation to retain a proportion of currency exposure while the fixed-income allocation is typically fully currency hedged.”
Further, as an extension of managing a strategic currency profile, investors – typically global macro funds – can also view currency markets as a standalone investable source of return to generate alpha.
Specialist support
Managing FX risk in-house requires significant expertise, and while strategies will be fully tailored and the buy side has full oversight and control, they can be a considerable operational burden to maintain.
For some buy-side traders it makes sense to outsource FX hedging to providers offering forward and options execution, currency overlay and custom hedging, leaving them to get on with the business of managing the stocks.
A 2024 State Street survey reveals that while fewer than one-fifth (18%) of global institutional investors currently outsource FX trading, almost three-quarters (73%) plan to do so in future.
Specialist currency overlay managers offer dedicated teams with expertise in FX dynamics, monetary policy analysis and hedging instruments. And they have access to advanced technology, algorithms and real-time data for efficient execution.
Jason Lenzo
Jason Lenzo, Managing Director & Global Head of Trading, Russell Investments, says: “When currency hedging global equity portfolios, the choice of currency hedge ratio can be more complex than when currency hedging fixed income portfolios. Understanding embedded currency exposure in global equity portfolios and understanding the correlations between foreign equity prices and exchange rates is critical in determining optimal hedge ratios. We have developed tools to conduct this analysis as clients continue to ask for guidance in this area.”
Meanwhile Marcus Fernandes, Global Head of Currency Management, Banking & Markets at Northern Trust, adds: “We have very large clients, so efficiency is a big driver of what defines an optimal [FX hedging] solution. Hedging FX risk across portfolios with large and varied holdings requires seamless data-capture and operations as well as access to liquidity.”
Fernandes says he sees a strong demand for tech-led products with automation driving scale alongside strong real-time transparency, where clients value the ability to monitor the hedges as we manage them.
Paying it forward
Marcus Fernandes
Derivatives play an important role in FX hedging. “We operate in the FX forward and spot markets, which are some of the deepest markets out there,” Fernades says. “These more vanilla instruments allow for efficiencies of scale when operating in size as well as lower volatility risks from having fewer moving parts.”
Forwards are a key part of the FX hedging toolkit at Schroders FX Solutions, where traders have an eye on cost efficiencies and tailored strategies. Forwards usually have no upfront premium to pay and execution costs are built into the spread, making them more cost effective than options.
Darren Bustin, Global Head of Solutions Capabilities and Insurance Capabilities at Schroders Solutions, says: “We aim to implement currency hedging programmes using liquid and cost-effective instruments. FX forwards and cross-currency swaps are the primary derivative products used to reduce foreign-exchange risk.”
He continues: “In an increasing number of situations, FX options are utilised to tailor hedges that align more closely with clients’ currency expectations and risk tolerances. Notably, to hedge illiquid private assets, we observe widespread use of FX forwards rolled at historical rates. This approach minimises the portfolio’s need for substantial cash holdings, thereby reducing the drag of such cash on performance.”
For buy-side managers that hedge FX risk in house, futures and forwards are no less important but traders obviously rely on their own internal expertise to run the strategies.
Ed Wicks, Global Head of Trading and Liquidity Management at L&G’s asset management business, says the business offers 24-hour coverage for the portfolio management five days a week, executing approximately £7 trillion across all asset classes, of which £1 trillion is FX related activity.
“We break that down to three types of FX activity: FX futures and options, so listed derivatives; the FX outright business; and the FX swap business. By far the biggest part of those three would be swaps, followed by the outright business, and then the futures business,” Wicks explains.
The outright FX business focuses on forwards, which Wicks says typically are executed via an algorithmic execution channel, leveraging broker provided algorithms. “Or we may want to transfer the risk more quickly, in which case we would use RFQ,” Wicks adds.
Meanwhile, Elke Wenzler, Head of Multi-Asset Trading Desk at MEAG, a Munich Re company with €347 billion under management where 30% of the equity portfolio is non-euro denominated, says her portfolio managers look at FX risk holistically across all asset classes.
“We are a very active, very FX intensive business which is why we don’t outsource.” She continues: “We use forwards and a lot of options as well, which distinguishes us from others.”
Wenzler explains that MEAG combines plain vanilla options with forwards to manage FX risk across different currencies depending on the available risk budget. “We use triggers to decide which currencies are worthwhile hedging and look at what costs are involved. And then we use technical analysis to understand the market circumstances and the current risk appetite of the mandate. It is a bespoke strategy,” she says.
Technology driven
Irrespective of whether the FX is outsourced or traded inhouse, the latest technology is essential in delivering best execution.
Technological advancements have made FX hedging more precise, cost-effective and transparent. Automation, AI and advanced data analytics allow global equity investors to manage currency risk with greater speed, accuracy and scalability.
Darren Bustin
Bustin says: “Technology and automation are both key to operationally scale Schroders’ capabilities in implementing FX hedging strategies. Our ability to trade FX efficiently and efficaciously is a function of our group investment into systems and implementing straight-through processes (STP) to reduce both time and risk.”
STP in FX trading is evolving rapidly, with automation, AI, and cloud computing driving major improvements. These technologies enhance efficiency, reduce risk, and ensure that FX trades flow seamlessly from order to settlement. As more players adopt advanced STP systems, the FX market is becoming faster, safer, and more transparent.
Wenzler says: “STP significantly reduces the risks in the trading process. Options trading was always a very bespoke scene between client and counterpart, and now we have a much better and safer approach using STP.”
Wicks agrees that technology is a “huge part of all of what we do across all asset classes, including FX”. He adds: “We leverage automation technologies through our execution management systems, so low value orders can be identified, the benchmark can be identified, and they can be automatically routed to an appropriate venue and then automatically booked once they’ve been filled.”
Wicks notes that given the size of L&G’s asset management business, it operates three different trading systems which means it can avoid the major inconvenience should anything go wrong.
“We have access to three different trading systems for FX. A primary trading system, which is where the majority of our flow goes, a secondary system for backup and – given the size of our business – we maintain a third to secure operational resilience.”
Technology is also critical for Northen Trust which, like L&G, is responsible for trillions worth of assets.
Fernandes says: “The sheer size and trading volume in currency markets means that technology has a massive impact on the solutions we can provide. We are a large-scale aggregator of data in currency management, and volatility increases the potential for errors in the data. Our global technology platform enables a level of oversight, risk management and automation that was not possible a number of years ago.”
He says outsourced providers can offer different levels of automation, to match the needs of their clients, adding: “Along with technology, it’s also important to provide clients the expertise to guide them through the process of digitising, automating and optimising their FX operations.”
As FX hedging evolves from a simple execution exercise to one that offers strategic benefits, so traders need a blend of technology expertise, data-driven insights and collaborative decision-making. Whether hedging in-house or outsourcing to third-party specialists, those who can leverage automation, integrate advanced analytics and align FX strategies with broader portfolio goals deliver optimum outcomes.
Michael Hunstad and Christian Roth, global co-chief investment officers, Northern Trust Asset Management
Northern Trust Asset Management (NTAM) has named Michael Hunstad and Christian Roth global co-chief investment officers, effective 1 June.
They replace Angelo Manioudakis, who has held the role since 2021, and report to NTAM president Daniel Gamba.
NTAM holds US$1.3 trillion in assets under management, US$758 billion of which is made up of equity assets. A further US$490.1 billion consist of fixed income and liquidity assets.
The duo are responsible for NTAM’s overall investment philosophy and performance. They will manage the group’s regional chief investment officers across asset classes.
Gamba commented: “They have each made significant contributions to NTAM’s investment platform, aligned to NTAM’s core philosophy that investors should be compensated for the risks they take, in all market environments and investment strategies.”
Hunstad has been chief investment officer for global equities at NTAM since 2020, and deputy chief investment officer since 2023. Half of his more than two-decade career has been spent with NTAM, holding roles including head of quantitative research and head of global equity strategy.
Earlier in his career, Hunstad was a senior quantitative strategist at algo trading firm Breakwater Capital and head of asset allocation research at Allstate Investments.
Roth has close to four decades of industry experience, and has been chief investment officer for global fixed income at NTAM since April 2024. Prior to this, he spent almost 25 years at Morgan Stanley Investment Management – most latterly leading the fixed income markets division.
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