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FOW Derivatives World Asia 2018 Recap

FOW Derivatives World Asia 2018 Recap

FOW Derivatives World Asia, which was held in Hong Kong on April 11, found markets at an awkward stage and that may have resulted in a lower than normal level of attendance for the event. Still, there was plenty going on with hot topics of conversation centered around cryptocurrencies, Chinese oil futures, and the acquisition of Fidessa.

The cryptocurrency craze of 2017 has settled down, leaving market participants in a more conservative, “wait and see” posture. Asia has been at the forefront of crypto adoption, with one study suggesting that one in three Korean workers has invested in cryptocurrencies and an estimate from Japan’s FSA this week put the total number of cryptocurrency traders at 3.5 million in that country. Cboe Global Markets and CME Group, both of which launched bitcoin futures in December, had a presence at the event and Tim McCourt revealed that 30% of their trading volume is coming from overseas with Asia accounting for “a big chunk”. Simply put, cryptocurrency prices have fallen and investor interest has dissipated as well, at least for now.

There is also a great deal of interest in the yuan-denominated INE oil futures contracts that was launched on Shanghai-based Shanghai International Energy Exchange in March. Volume was good out of the blocks but has settled back over the past couple of weeks. Many traders seem to still be in the process of sourcing broker coverage for the products and there is a conservative mindset that skews toward going a little more slowly in building the market. Given the previous “start – stop” experiences with other commodity markets as well as the knowledge that China is building its markets for the long haul, making quick and immediate action unnecessary. Overall, traders are satisfied with the results to date and optimistic for more growth in the future.

In Japan, foreign trading firms are in need of local agents to represent them with regard to new HFT rules that were put in place beginning on April 1.  HFT investors are required to provide JFSA with certain information on the outline of their high frequency strategies, key compliance and risk controls and, as is so often the case, firms have been caught flat footed on some of the requirements in the new regulations. However, this is more than a blip than a serious impediment and will be worked out in short order.

All in all, the climate is positive but cautious at this point in time. 2017 was a very positive year in general for markets in Asia but the pause in the the rise of cryptocurrencies, a go-slow approach to new products such as INE, the advent of new regulations such as the HFT rules recently instituted in Japan, not to mention the possibility of a trade war between the U.S. and China have put a little bit of a damper on growth and expectations. How the rest of 2018 unfold remains to be seen.

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