Ping Tan, Managing Director, Global Head of EFX Liquidity, Head of Asia eFX & TFX Trading at Bank of America N.A. Singapore Branch, spoke with Markets Media Group Senior Writer Julie Ros about trends in FX trading.
Tell me a bit about your role at Bank of America?
I oversee the global eFX trading operations with regards to the principal liquidity provision business, as well as the Asia region’s eFX and transactional FX (TFX) trading teams. I am also responsible for the Global FX Local Currency Trading (LCT) Product Roadmap globally to ensure projects are delivered with our tech partners, and that businesses’ tech funding needs are well-articulated.
Additionally, I represent the eFX business globally to ensure our governance routines and regulatory and controls frameworks are well-implemented, working closely with control partners and regulators where necessary.
You recently moved from Hong Kong to Singapore and started traveling again. Is the post-pandemic world different in terms of connecting with colleagues and clients?
There’s definitely a huge desire from everyone to move away from Webex/Zoom meetings to in-person interactions. We have learned from the pandemic that as much as it gave us some efficiencies, many of us have found that it can be more powerful to just be in a room with people where you can read body language and have more impromptu discussions. That said, we still leverage WebEx/Zoom when it makes sense. Going from purely in-person, to 100% virtual, to a combination of both really strikes a nice balance.
The Monetary Authority of Singapore (MAS) has been working to establish itself as the hub for FX trading in the region. How has this been going from your perspective?
The biggest product to benefit from MAS’s FX ecosystem push is Asia FX NDFs, where the MAS grant program for trading venues has led to a few secondary venues setting up their SG1 presence for matching. However, the adoption has been slow as market participants are still keen to anchor on a primary venue as the industry benchmark for price disputes following the 2015 Swiss National Bank event when the central bank abruptly ended the CHF peg to the euro. EBS is of course the primary venue but has not been able to expand to SG1 since its acquisition by CME, which leaves Reuters – after its merger with LSEG – with a great opportunity to come in and finally take up the MAS grant to launch the SG1 NDF matching, which is targeted for Q1 2024.
Besides NDFs, which currencies do you think will become interesting?
Most likely the CNH (offshore Renminbi), but a lot of that trading volume is still predominantly in Hong Kong and London.
Do you see that changing?
Not really. I think the clients and banks still want to be based out of Hong Kong due to proximity to onshore China, which drives a lot of the offshore CNH trend. At the moment, a lot of the electronic interbank volume is still matching on venues like EBS, so unless a venue like Reuters pushes CNH matching into SG1, it’s difficult to see the volume shifting too much. It’s still very much predominantly Hong Kong or London. EBS recently migrated its matching engine from Tokyo to London on the back of the CME acquisition, putting an end to its follow-the-sun model. So emerging currencies and NDFs are matching in London, while G10 is now matching in New York.
What are you seeing in terms of volumes? Has the higher interest rate environment impacted FX in Asia?
The inflation concerns that have resulted in aggressive rate hikes globally have led to a lot of volatility in FX trading. Last year was therefore a very big year for the macro space in terms of trading opportunities and volume. The increased volatility led to a lot more two-way interest from the client side. So, we’ve seen a spike in volume across the board. This year has not been as clear in terms of the interest rate trend. The last few months have been a little bit more sporadic than 2022, which was impacted by the war in Ukraine and other politically driven events.
Looking regionally, CNH saw the biggest jump in traded volume – from 4% to 7% – establishing it as a top five currency traded versus eighth in 2019, according to the 2022 BIS survey. The currency is still heavily traded out of Hong Kong and London, as I mentioned, and will continue to be a key Asian currency to watch.
Has the Ukraine situation affected the region?
No, not really. Markets here have been more concerned about oil prices and higher interest rates.
What have been some of the more notable developments in terms of technology?
In the eFX space, the MAS push has been one of the key factors in terms of ecosystem development here. There has been a bit of consolidation happening with the venues – first CME buying EBS – and more recently, SGX buying MaxxTrader and BidFX. To be fair, there’s a lot of fragmentation in FX, so these moves have been welcome.
What do you think will be next in terms of product growth?
Our expectation is that FX swaps will become more electronically traded. With the funding Reuters LSEG got for the SG1 work for spot, NDFs, and swaps, it will upgrade their CLOB matching. That would be an interesting move that should result in better price discovery. There’s a very big appetite in the market to get more swap market data discovery, and the ability to start hedging swaps electronically. So, I think that could be the next thing to develop in the eFX space over the next few years, depending on how quickly Reuters upgrades the technology stack. By using the same API for all three products, Reuters is making the lift for us to electronically place orders for NDFs and swaps on a CLOB much easier – a welcome change for a lot of banks that are dealing with various projects that are competing internally for funding.
360T has been doing a great job with its swap market data product, but it hasn’t been able to do the trading. So, it’ll be interesting if Reuters can create a decent electronic marketplace. I think they’re also looking at clearing, which could make swaps and NDFs easier to trade.
Has algo trading gained any momentum?
We have seen algos pick up in the past few years. When I first moved to Asia in 2015-2016, it was still deemed as unthinkable by clients that didn’t see the value in paying for that type of execution. But now, there’s more understanding around it and clients are more accepting about paying for more sophisticated execution and the TCA that comes with it. Today, it’s actually quite a common offering, but volume is still very much in the spot space. I would say 90-95% of the volume is going through index or spot algos versus the NDFs, which involve regulatory reporting frameworks around SEFs and MTFs.
What types of clients are using algos?
It varies, but most of the names that tend to do bigger chunks/higher volume tickets are the larger corporates, sovereign wealth funds, and real money names, particularly when they need to do rebalancing.
Does Bank of America have any new product or growth plans that you can share?
We are constantly evolving to keep up with the pace of innovation, including leveraging our equities framework for our FX algo executions, as well as using big data and signals to identify trends and increase our models’ sophistication levels. Responsible growth is always at the forefront of our strategies, and this includes ensuring we grow our market share in a responsible way with our clients and the markets we operate in.
You have been very active in terms of supporting women’s leadership initiatives at Bank of America, can you tell me about some of the work you’re involved in?
I have been fortunate during my career to have some very supportive managers and some excellent mentors. I’ve always wanted to give back and have tried to do so through various avenues.
I helped relaunch and ran the Women’s Leadership Council in Asia several years ago, but I have stepped down from that and have been overseeing the Asia Pacific FICC employee engagement committee since 2019, which spans a variety of diversity and inclusion initiatives, including women empowerment. This is particularly important to me as a woman working on a trading floor.
I am also currently on Bank of America’s Singapore Philanthropy Committee, which is responsible for overseeing our grant relationship with NGO Generation and driving our volunteer engagements. I was also the leader for the Power of 10 network in Hong Kong and am planning to start one in Singapore now that I’m based here. This is an initiative that our Human Resources department started through our employee network LEAD (Leadership, Empowerment, Advocacy, Development), which supports women across all functions, not just the front office, to empower, inspire, and motivate.
