December 19, 2005

There have been no earth-shattering trading scandals or new technologies that have transformed the industry, but things have moved on quickly nonetheless.

The barnstorming results posted by the US investment banks this week are testament to the continuing strength of foreign exchange as an asset class. Research firms have also highlighted the continuing bonanza available for those who have significant market share.

But the growth in the market holds dangers for those who are now apparently racing ahead. As with any market that is seemingly growing at what looks like an exponential rate, expectations have a tendency to become unrealistic. There is always scope for disappointment when the outlook is bright.

Those who operate on the basis that growing volumes and new customers will continue to rise inexorably are likely to be in for a nasty shock. Every boom market is followed by a bust.

Those that will be the long-term winners in the FX market are those who have business models that are already looking to meet the changed realities of the market. The cliché that any business's key strength is its people is true. Only those businesses that invest in staff who can mine the market for the right opportunities will be able to tough it out when times get tougher.

This is why it is heartening that FX desks at banks are attracting staff from other asset classes. Increasing the calibre of staff is the only way to ensure that businesses stay ahead of the pack. While there has been a trend in recent years for the average age of the typical staffer on an FX desk to head ever-upwards, the situation seems to be turning the corner, and FX is now an attractive place for the best and brightest new recruits in the financial industry.