EBC’s David Barrett: Liquidity is as much an art as a science

Recently, WORLD FINANCE presented an award ceremony to give recognition to the brokers who demonstrated exceptional service to clients. Despite the challenging year of 2023 for the Forex industry, some brokers have paved the way during this challenging yet volatile year 2023 and deserve recognition for their resilience and excellence through these presented awards by WORLD FINANCE.

With more than 15 distinguished awards for their respective recognitions, EBC Financial Group, established in the epicentre of the financial industry of London has won two reputable awards for “Best Trading Execution” and “Best Foreign Exchange Trading Platform”. EBC Financial Group CEO, Mr. David Barrett was invited to have an interview session with the WORLD FINANCE on several topics that are closely related to what is currently happening in the trading landscape, and the global market liquidity issues.

David Barrett boasts an extensive, 35-year financial market experience. Throughout the years, he founded several financial consultancy businesses. With a strong foundation in foreign exchange, fixed income, commodities, and derivatives, Barrett was also appointed to sales and trading roles for financial institutions including AIG, NatWest, ABN Amro, and Nomura Securities in the United States (US). Barrett was invited as a guest and had a fruitful discussion with WORLD FINANCE on the impact of rising interest rates on global markets, the US banking crisis, and how derivatives are carving out a role in sustainable investing.

How have recent market volatility and economic conditions affected liquidity in global markets?

David Barrett: There can be no doubt that liquidity in all markets has suffered in the first few months of 2023. Liquidity tends to be driven by participant confidence, high volumes, efficient price discovery, and the staple ‘fear and greed’ effects, all of which have come under pressure of late. We have had so many newsworthy events in 2023 already that it is hard to know where to start but the core disruptor, in my view, has been the sharp rise in rates across the globe. All markets have spent over a decade learning to live with and take advantage of, a near-zero rate environment. The rapid move in higher interest rates over the last 12 months has laid bare how ingrained those low rates have become.

What are the big trends driving the evolution of the derivatives market?

David Barrett: Technology has opened all markets to a much wider range of participants in recent years. Retail investor participation in derivatives markets has increased significantly, with the pandemic accelerating the process. Western markets have seen volumes increase by 15-30 percent and Middle East and Asia Pacific regions have seen by 50-60 percent increase on some exchanges. This huge increase in demand has led to a wider range of derivative products across global markets

What do you think of the growing trend of sustainable investing?

David Barrett: The focus on sustainable investing has opened a new audience for derivative trading. Broadly speaking, these products give exposure to end-users to achieve Environmental, Social, and Governance (ESG) objectives. The growth in focusing on sustainable investing has led to a strong demand for and the development of sustainability-linked derivatives and other ESG-oriented contracts. There are several broad types of derivatives linked to sustainability, including emission trading, renewable energy and fuel, sustainable credit derivatives, and sustainable-related Credit Default Swaps (CDS). while EBC, like other brokers, cares about the experience of its clients on how they would like to reflect their views on sustainability and ESG investing. In the future, we will expand our services to include access to CFDs and derivatives products to meet our client’s requirements and preferences.

How is the regulatory landscape changing, and what does this mean for derivatives?

David Barrett: Past decade, financial markets have experienced unprecedented regulatory change. Following the financial crisis, derivatives had a front and centre seat in the inquisition that followed. While many market participants had huge failures in how they managed their derivatives exposure, it was equally clear that regulators had not had the best experience either.

Regulators have pushed hard to remove as much derivative trading as possible from the over-the-counter (OTC) markets and push it on to exchange execution. While this consolidation has reduced large firms’ exposure to each other, the execution and cash usage associated with exchange trading will be a cause of concern to derivative providers and users alike. Counterparty risk management is clearly reduced in exchange-cleared derivatives, but the drive to push trades this way has made innovation and bespoke trades costly and complex to manage. Both the global financial crisis and the COVID-19 pandemic have shown that due to the strong interconnectedness of various markets, on-exchange trading does not mean absolute safety. It could be argued that this is to the detriment of end users and that we should not fall into thinking using central clearing counterparties (CCPs) comes without risk.

What has EBC been doing to help clients manage risk and improve liquidity specifically with this issue in mind?

David Barrett: Volatility and leverage work both ways for clients. As a well-regulated firm, we are fully aware of our responsibilities in helping clients understand and manage both. We have tier-one liquidity relationships that help us manage how we access pricing and how we tailor that pricing to each client’s needs. Liquidity is as much an art as a science. We deliberately use fewer, but better quality providers so that our relationships with them remain close and beneficial to all. Using market-leading technology to deliver liquidity to clients is just as crucial, and our operational tools give our clients the information they need to manage their trading exposure and risk.

In addition to providing the best liquidity, it is also very important to use market-leading technology to match the liquidity to clients. EBC Financial Group is equipped with tools that provide clients with the information they need to better manage trading exposure and risk.

Lastly, David said that EBC Group always adheres to the principles of integrity and respect and puts the client’s financial security first.

EBC Group is regulated under dual-supervision providers from Britain and Australia. Strictly follows the compliance requirements of the British Financial Conduct Authority (FCA), and customer funds are independently managed by Barclays Bank, UK. At the same time, EBC was covered by insurance worth more than 10 million US dollars from Lloyds, UK, and AON group annually to minimize traders from any risks.

EBC has always making effort to create a robust trading environment that aligns with its development goal, seeking global investment opportunities for clients, and building a safer and more equipped financial ecosystem.

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