Last week, one of our investment writers, Tony Cross, was in Bangkok for iFX Expo. Although strictly a B2B conference, clearly many of the innovations discussed at events like this eventually cascade down to retail investors so with that agenda very much in mind, Tony gives us some of his key takeaways from the event.
Globalisation still has some way to go
Traders in different parts of the world have very different demands when it comes to the assets they want access to. In Europe, it was noted that indices and single stocks were now dominant, with regulatory change being seen as a key driver in suppressing demand for leveraged forex trading. Move to the Middle East and consensus was that demand for oil and precious metals remained very much front of mind. Then, heading further east still to APAC, clients are left wanting access to major FX crosses, cryptos and broader commodities.
Perhaps understandably, this lack of symmetrical demand has some interesting implications in terms of the liquidity that’s on offer, not only by asset type but also by geography. So whilst traders based in Europe may be finding it increasingly easy to get ever better pricing on an every growing array of “local” equities, looking further afield the picture is very different – at least for now.
Does regulation hold the key?
It was suggested that regulatory constraints had precipitated something of a shift in retail consumer behaviour in Europe, away from highly leveraged FX to low or unleveraged equity trading. Australian regulators have previously been seen to be taking at least some inspiration from Europe and with talk that Asian regulators may be looking to present a more unified approach, could this precipitate more comprehensive – and more granular – equity offering for all? That would require a number of proverbial stars to align, but it could certainly hold some exciting opportunities in terms of equity portfolio diversification for those investors wanting to take a proactive approach.
Homogenisation won’t be the end of volatility
Regardless of whether coming from a retail or institutional background, each “market participant” has a different need in terms of trading frequency and duration. Whilst the conference floated the idea that some convergence may be seen regarding product offerings at a global level, this is unlikely to have any meaningful impact on volatility. Increased volumes in niche products – simply as a mathematical function – can reduce price action. But, as we have seen in recent weeks and months, with central banks actively managing monetary policy once again and with geopolitical factors also in play, greater trading volumes will invariably be eclipsed by macroeconomics when it comes to volatility.