Muamar Behnam, Swissquote’s head of global retail sales, reflects upon the tumultuous events of 2022 and describes the effects on the foreign exchange market and his business.
From an FX perspective, how would you sum up the market moves this year?
Bearish and focused. Traders often kept their positions once the events in Ukraine began. The interest rates at the beginning of the year were still in the lower bracket, so it wasn’t too costly to keep some positions over a long period. We saw also a major focus on commodities, mainly energy, as those were the most volatile instruments over this specific year. Seeing oil break the 120 USD mark in early March, exactly two years after going into negative territory at the beginning of the pandemic, probably got a few traders thinking about their oil positions of a couple of years ago, and the panic sell on the market that occurred.
How have geopolitical events impacted your clients’ attitude to the FX markets?
The shift from currencies to commodities was driven 100 % by the geopolitical events, so yes these events definitely impacted our clients’ attitude.
What have been the biggest challenges?
The biggest challenge was to satisfy the demand, in terms of commodities, of our clients. It meant that we had to add new instruments that people were eager to trade. This very strong demand was, at Swissquote, almost non-existent – if you except the traditional energy and precious metals – before the events of this year.
Have there been opportunities too?
As you may know, at Swissquote we offer actual cryptos – not leveraged CFDs on cryptos – and many clients invested heavily in these. The onset of what is now commonly called the “Crypto Winter”* saw clients with large portfolios of crypto currencies shifting to the eFX/CFD market. A proportion of these investors seized the opportunity to diversify their portfolio over the year.
What has been the impact of higher inflation and higher interest rates?
More volume, mainly. During the second half of the year, we saw major swings on currencies with each rate hike, and inflation numbers, which for many years have had almost no impact on the market, are now again eagerly awaited every month by investors.
How long do you expect these conditions to persist?
As long as geopolitical uncertainty remains, markets will stay nervous. Even though they’re less shaky than at the beginning of the year, these conditions are also an opportunity, especially on the eFX/CFD markets.
What are the key differences in your approach to institutional vs retail business?
Platforms, liquidity, execution, every aspect is different. Institutional business is a different animal. It requires more monitoring, follow-up, flows are sharper, volumes are multiples of the retail ones, revenues are indeed less in terms of DPM, but it is our role to accommodate both types of clientele. We have dedicated desks for both types of clients as any serious liquidity provider does.
What investment (in data and technology) have you made to navigate these types of markets?
Swissquote, is an online bank, founded by engineer, which has a ‘never satisfied – we can always improve’ approach to technology and services. As a result we are always investing and this year there have been investments in new institutional platforms, an increase in our instrument offering, as well as the enhancement of our existing platforms.
Looking ahead, what do you see for 2023?
I would love to say a return to normality, you know… back to the pre-pandemic world, with no conflict, but then again my optimistic nature has been battered by the reality of the world these past 3 years. But, fingers crossed, let’s hope that 2023 will be a peaceful year and a more engaging one for investors.
*“Crypto winter” is when prices contract and remain low for an extended period. Analysts believe the wheels of the emerging crypto winter were set in motion earlier in 2022.
