“Mind The Gap!” – The life and times of a man on the move Episode 13

In this weekly series, I look back on what stood out, what was bemusing, amusing and interesting during my weekly travels, interesting findings within the FX industry and interaction with an ever-shrinking big wide world. This is purely observational and for your enjoyment.

Monday: China bows out, Hong Kong may step in

Contrary to popular opinion, mainland China is not chasing international FX firms out from within its borders with a metaphorical iron bar, however there is most definitely some evidence that the nation’s notoriously Orwellian government has taken a dim view of some of the activities of retail margin FX companies with no operations in the mainland, which the government considers to be disturbing the perceived Utopian communist ideology of ‘social stability.’

It is considerably easier for China to put an end to any activity in any industry sector that it does not approve of, largely because it has its own very sophisticated internet system that is operated by no less than 2 million government employees who are directly positioned within the Internet department of the government, and because President Xi Jinping is the chairman of the internet department.

Therefore, sites and companies that are not welcome to peddle their services can simply be blocked from any form of access to the Chinese market, and their presence removed from any Chinese search engine.

With very restricted access to mainstream search engines such as Google, the all encompassing Chinese system and the government’s position on what is being sold is the absolute make or break feature of any business.

Thus, on Monday, I spoke to a compliance officer based in Hong Kong on the possibility that may arise from Hong Kong’s new regulatory stance on payment processing, that being a very important matter in South East Asia because one of the Chinese government’s most proactive methods of chopping off a company’s access to Chinese clients is by blocking their merchant services gateway so that payments cannot be transferred.

Whilst being based in Hong Kong serves little or no purpose when attempting to access mainland China – yes, Hong Kong is a Special Administrative Region of China but it is still very much outside the internet firewall and subject to very strong restrictions due to its standing as an international business center – the Chinese government does have jurisdiction to some extent and also has a lot of surveillance activity.

Thus, the compliance officer with whom I spoke this Monday stated that because of the method by which the new system is being structured and the currencies that it clears, it may well be as close as can be to the silver bullet.

FinanceFeeds reported immediately upon the development as soon as it was announced, our report stating that Hong Kong is steadily moving towards new financial technology implementation, with the Hong Kong Monetary Authority (HKMA) having announced the launch of the Faster Payment System (FPS).

The FPS operates on a round-the-clock basis and connects banks and stored-value facility (SVF) operators on the same platform and enables the public to transfer funds anytime, anywhere, across different banks or SVFs with funds available almost immediately. Fund transfer will become very user-friendly with the use of mobile number or email address as account proxy for the payee. In addition to the Hong Kong Dollar (HKD), the FPS also supports Renminbi (RMB) payments which according to the compliance official with whom I had the conversation on Monday, will not be restricted to Hong Kong’s offshore renminbi (CNH) but also the proper, mainland, standard issue renminbi (RMB).

This places Hong Kong in a very good position to be the payment transfer and processing center at bank and merchant services provider level for firms wishing to do business in China (simply do the processing with Hong Kong banks and have a Hong Kong based renminbi-denominated bank account, then do interbank transfers to and from the mainland which is an activity that does not require payment processing) and for Chinese firms to do the same when working with overseas firms.

This way, no third-rate, very dubious payment processing firms are needed, the whole transaction can be backed and operated by banks in Hong Kong, which, let’s face it are some of the very best in the world and many have British origins such as HSBC and yes, Standard Chartered may well be South African, but it is as British as the empire which created it.

The end of the tunnel, therefore, has light. Quite a bright light, at that.

Tuesday and Wednesday: Fasts aren’t always fast. This fast was fast.

Tuesday afternoon was the beginning of Yom Kippur, the most important and significant day in the Jewish calendar, which involves a 25 hour fast and lots of reflection on the year gone by.

This, therefore, was a very rare day of detachment from the everyday interaction with the world, and the fascinating daily interactions which I enjoy tremendously with my esteemed colleagues across the world who are the lifeblood of the FX industry.

As my very much needed and long overdue diet is now one and a half months in progress, I thought that this year’s fast would be much harder than those of years gone by, largely because instead of indulge in my usual “arucha mafseket” – literally finishing meal – which usually involves lots of carbohydrates and a far larger portion than is sensible in the hope that it may sustain me at least through most of the fast, I simply had some very light vegetables and smoked salmon.

The result? No hunger and a fast that went past very easily with enough comfort to be in synagogue for the important parts during the 25 hours. As this is the first ever diet I have ever undertaken, it gave me a different perspective on the introspective aspects of Yom Kippur, and I have come to the conclusion that the traditional method of pre-fast carbo-bashing represents a sort of gluttony in itself, as it is self indulgent and aims to fend off some of the effects of an important fast yet serves an adverse purpose.

Thus, less is more in this case, and I believe this theory in some ways can be translated into business ethic too.

Thursday: Wherever IB, the plumber be too!

Walking past a run-down condo in Tel Aviv’s “Old North” district is not something that anyone familiar with that expansive and densely populated neighborhood would really take as something out of the ordinary, as the thousands of 1970s concrete apartment buildings which appear to have been designed in the first place by Ray Charles and Stevie Wonder who then handed the plans to Frank Spencer to conduct quality control are all in various states of dilapidation that would be alien to anyone used to the landscape and careful-mindedness of the first world, yet a familiar daily eyesore to those who frequent it for any length of time.

This Thursday, however, the otherwise very usual unfinished and often bodged ‘repair’ work that adorns pretty much every building with their abundance of wires and cables dangling everywhere from windows to balconies, unkempt gardens, disintegrating concrete facades and wrecked window blinds stood out more than usual.

It would appear that a plumber replacing some of the internal water hoses within the top floor of a 5-floor condo has inadvertently inscribed the abbreviation for “introducing broker” in the concrete when filling in the channels that were used to replace the pipes.

Cue the residents association putting a bar on the telephone line and door intercom as a result of repeated calls from partners departments of local retail brokerages to sign them up for a revenue share agreement!

Friday: Onions & Baguettes vs Fish & Chips. 

Friday’s speech by British Prime Minister Theresa May has whipped the mainstream media into a sensationalist storm, which is rather puzzling.

Many tabloids across Britain have been holding Mrs May’s dialog against European Union officials as her ‘finest hour.’

Quite how to define Mrs May’s finest hour requires some vigorous scraping of a very large and forgettable barrel as an activity itself, as Mrs May has all the charisma and leadership skills of an assistant librarian at a North Korean elementary school.

Interesting and inspiring she is not. Any comparison to the late, great Baroness Margaret Thatcher is rather like comparing Concorde to a hearing-aid-beige late 1980s Nissan Micra.

The storm in a teacup this time in the double edge battle for the United Kingdom to exit from the economically derelict European Union and stop throwing billions of taxpayers money and profits from extremely efficient and ultra-modern British companies into the ungrateful hands of socialists who preside over an archaic continent of political rebellion, corruption, unemployment and siestas was Mrs May’s accusation that Brussels bureaucrats are ‘making a mockery’ of the United Kingdom after they rejected her Chequers plan and refused to budge on their demands for the Irish border.

The Prime Minister said there had been some progress but warned there are two major issues – the Irish border and the integrity of the EU’s single market – on which “we remain a long way apart”.

In a furious speech just weeks before the deadline for a possible agreement, Mrs May told her EU counterparts they are making a “fundamental mistake” if they believe she will let the UK be broken up over the Northern Ireland border issue.
She said she was committed to attempting to secure a withdrawal agreement but hit out at Brussels for its refusal to compromise and warned that Britain would leave without a deal rather than agree to the bloc’s current demands.

Speaking inside 10 Downing Street, she said: “I have always said that these negotiations would be tough, and they were always bound to be toughest in the final straight. “While both sides want a deal, we have to face up to the fact that despite the progress we have made there are two big issues where we remain a long way apart.”

Does it matter, Mrs May? One thing I know about the tenacity and precision of the British people, which runs right from their extensive history as an imperial superpower to the work ethic and continual innovation of the nation’s polite but robust population is that they cannot stand being bullied, especially by those with unpleasant intentions – in this case keeping the gravy train going.

The deal does not matter. I have spoken to many FX industry professionals outside the UK, especially in North America and Australia over the past few weeks, all of whom agree that the Brexit – whether with or without a deal with Europe – means open markets for the world to access the global powerhouse of London, and will mean that any individuals wishing to work or visit will just require a visa.

I actually believe that any of the well organized and profitable European firms will actually set up a UK office if there is a hard Brexit, further contributing to the British economy, as Europe will not be able to sustain itself on handouts from the well run pocket of the British anymore and any sensible strategic operations executive will know this hence look for operations in the UK.

As far as our industry is concerned, that is already the case. Deutsche Bank, Credit Suisse (OK, Switzerland is not in the EU, but it’s not British!), BNP Paribas, Societe Generale and Santander all have their major investment banking and professional services divisions in London.

Heavy engineering firms such as IVECO – an Italian firm – is based in Basildon, Essex.

Royal Dutch Shell and Total (Dutch and French respectively and jointly the fifth largest firms in Europe by market cap) operate from London with Shell’s head office being one of the most well known corporate buildings in the whole of Westminster’s SW1 postcode area.

Germany’s E.ON, one of the largest firms in continental Europe and 7th in terms of market cap is literally vast in the UK, providing over 16% of the UK’s domestic gas and electricity for the last seven years, with massive operations across the country.

Other very large firms, including ThyssenKrupp,

Repsol, Airbus, Landesbanken, Bosch, Maersk, Bayer, BASF, Nokia, Peugeot and Renault all have massive operations and headquarters across the UK, plus a vast corporate and residential customer base that is vital to their operations to an extent not replicated across home territory.

The rest of the continent – well, Spain, Portugal, Greece and parts of Southern Italy, accounting for almost half of the EU’s population, has an average of 57% unemployment for people under the age of 30, which means that as time goes on and that demographic ages, there will be no welfare input to support them and they are not skilled enough to gain employment and even if they were, 57% is vast and there are simply not the jobs and there isn’t the industry base. There are also nations where there is little unemployment but the average salary is around $300 per month, as is the case in rural Hungary or Romania.

If you want the best culture and food in the whole region, London is the place, not Paris or Cologne. It is not just a British capital, it is a world capital. An ultra-modern, multicultural New York with a Queen’s English accent.

In our industry, London will continue to rise from strength to strength, and will be able to do so in a very efficient manner, without the ball and chain around its ankle and without Jean-Claude Juncker eating from its Royal Doulton bone china dinner set.

I’m not partial to the stereotypical fish & chips – but this time they beat the baguette, at least in metaphorical terms.

Well done Mrs May. A cloudy English sky she may resemble, but if this is her stance, then the tabloids may for once have a point.

Wishing you all a super week ahead!