After an unprecedented start to the year Muamar Behnam, Head of Global Sales HQ at Swissquote Bank recounts how he and his team coped with the unpredictable and volatile markets.
What has been the impact of Covid-19 on FX? Which asset classes were most impacted and how – spot, forwards, etc?
It was a very interesting period to say the least. Currencies had their ups and downs during these last months, but without the shadow of a doubt, it was the precious metals, oil and other energy products, and the indices that moved beyond imagination. We saw things that we will remember all our lifetimes. The price of the WTI oil dropping to minus USD37on April 20th was for sure the biggest shock of all. Producers were paying buyers to take the commodity off their hands… unbelievable.
What long term impact do you think it will have – will this push the forward market to become more automated?
Having lived these events closely with our FX dealing team, I must say that automation is not the solution to everything. I am glad that humans took the right decisions to prevent clients from losing too much on the oil event for example. Deciding to remove a spot product, or closing a forward earlier than it’s expiry date, is never a popular decision, but it helped our clients, and Swissquote, avoid much more serious issues. I am not sure what will come out of all this at the end, or which lessons will be learned. Lots of banks and brokers took smart measures to try to protect their clients and themselves. And these decisions were made by a few brave traders all over the world – a fully automated system could have caused way further damage.
How did Swissquote manage operationally? What plans did you have in place to cope with the environment?
I was very positively surprised how our IT and logistics departments were prepared for this. From one day to another, 550 out of 600 people at our headquarters in Geneva were able to work seamlessly from home. Only some decision-makers, support teams, and essential collaborators stayed on site. Our headquarters were transformed within hours into a ‘Covid-safe’ working place, with distances between people and desks, total reorganisation of the cafeteria as well as providing masks and individual sanitisers. We’ve actually had sanitisers at many locations in the buildings way before the pandemic, so we were used to using them.
Have you seen an increase in demand?
It was a very interesting period for Swissquote. Demand in terms of new accounts reached unprecedented levels. Everything can, more or less, be done online. We have a validated online onboarding process that allows us to open Swiss bank accounts very quickly for private clients. People stuck at home during lockdown, and with limited access to their accounts at less digitalised banks often opened their second account with us.
What do you think will be the long term impact of Covid-19 on FX?
On FX, and leveraged trading in general, we will have to monitor more closely than ever what is going on in the world from now on. It seems that pure economic data (Central Bank interest rates, NFPs, etc.) has much less effect than geo-political events. What used to make the markets move, soar or drop yesterday, will be different today and tomorrow. That being said, I really hope that we will manage to avoid a bad second wave of the pandemic. Beyond the markets and FX, it might have consequences for generations, and that would be dramatic.
What challenges do you expect FX participants to have?
The challenges will probably be similar but expressed in a more acute way. Liquidity tends to dry up relatively quickly in these challenging times. The banks and brokers offering deep and diversified liquidity will be more able to cope. But Liquidity Providers are also more cautious when choosing the partners they decide to work with. They want solid partners they can rely on. Also, very volatile markets attract new traders to the market, but some have only limited knowledge of the risks they face with trading on highly leveraged products. They sometimes create considerable risks for their FX providers. Close monitoring and probably increased client education are key for the future of the business.
Aside from Covid-19, what other factors do you see impacting markets?
As said above, the major events are not any more the ones of yesterday. Covid-19 has diminished the impact of traditional economic data. The US elections this fall will probably be the focal point of the second part of the year. And, hopefully the impact of Covid-19 on the FX markets, and markets in general, will be limited with the slow decrease and end of the pandemic.
What are Swissquote’s plans for the next few months/the year ahead?
We have exciting projects that will soon be finished that will allow us to diversify our offering on the FX and CFD side. Our development and IT teams are working hard to finish them in the second part of the year. And we have new challenges here in Switzerland with ambitious new competitors entering the market. I firmly believe that competition helps everyone become better, so I am looking forward to these new actors on the Swiss market coming in with highly experienced people in the FX and CFD field.