Forex Consultancy Set Up To Target Risks In Forex Trading

LONDON--A new independent foreign exchange and currency derivatives consultancy has been set up by senior currency options specialist Martin Gymer, which will focus on risk management in forex trading. FX Derivative Consultants provides risk structure, systems and training advice to banks in the forex and currency options business.

During his 17 years in the forex industry, Gymer was the principal in six start-up forex options operations at US and European banks. He also put together the working document, and formed the international steering committee, on barrier options in 1995.

Gymer says the decision to start his own consultancy reflects the growing importance of risk management in the forex trading environment. "Option heads need to be hybrid traders and business managers. There is more and more involvement in sorting out systems, the euro, liaising with auditors and compliance staff, documentation and general structural issues. This poses the inevitable time issue for forex managers when balancing market trading and project management," he says.

A specialist consultant will offer an independent "health check" on systems, business structure and overall risk control covering the front, middle and back offices, he adds.

"A health check is a good idea for any bank before potential problems arise, particularly in the current climate," says Gymer. "There are too many occurrences of losses that could have been caught by better systems or risk structures. Most systems and revaluation procedures have the potential to be exploited. Although traders are self-regulated, it is banks' responsibility to ensure that they have the correct control functionality," says Gymer.

FX Derivatives Consultants aids in the selection and implementation process of new trading systems, legal documentation and credit and audit requirements, says Gymer.

The consultancy is also developing a programme of interactive workshops and simulated trading exercises, as well as pricing theory and risk management training, he adds.

The training service will be particularly useful for forex sales staff, says Gymer. He says the current market environment is making banks prone to vetting their customers in an effort to shore-up credit and counterparty risks. Thus, sales teams must learn new skills to understand these risks, he adds.

The consultancy also assists institutions with troubleshooting, says Gymer. Consultants locate and patch up risk issues or change business structures in cases where a particular division lowers its profitability. For example, should a bank lose a key trader, a specialist would evaluate and neutralize the risk in his/her portfolio.

Gymer anticipates working with other independent market practitioners, such as Alan Hicks, author of "Foreign Exchange Options" and a recognized authority on compliance issues and audit reporting, to provide a wider range of expertise. For further details on FX Derivative Consultants, email: [e-mail].

--Catherine Tillotson