Citigroup Cutting into Deutsche Bank FX Market Share

Citigroup, Deutsche Bank, and Bank of America make gains as Asia-Pacific grows to 26 percent of global currency-market volume.

Citigroup Inc. cut Deutsche Bank AG’s lead as the biggest currency trader in a Euromoney Institutional Investor Plc poll, boosted by its larger share of emerging-market transactions.

Citigroup came second in the annual rankings with a 14.90 percent market share, trailing that of Deutsche Bank by 0.28 percentage point, the second-slimmest margin since the poll began in 1976, Euromoney said in an e-mailed statement. The New York-based lender had a 15.64 percent share of emerging-market foreign exchange, versus Deutsche Bank’s 13.46 percent. The top nine held their overall positions from last year and Bank of America Merrill Lynch took Goldman Sachs Group Inc.’s 10th spot.

The Asia-Pacific region accounted for 26 percent of currency markets last year, the survey showed, up from 21 percent in 2012, as Japanese policies that debased the yen ignited trading interest and investors sought higher-yielding assets. The share for Europe, the Middle East, and Africa fell to 44 percent from 49 percent.

“Asia is a hot growth center, no question about that, but we saw volume and market-share gains across the world,” said Jeff Feig, global head of Group-of-10 foreign exchange at Citigroup in New York. “Our volumes were up significantly in a market where volumes were flat-to-down. Our goal is definitely to be widely recognized as the top foreign-exchange provider.”

Barclays Plc was the third-largest trader, with a 10.24 percent overall share, and Switzerland’s UBS AG was fourth with 10.11 percent, according to the survey. HSBC Holdings Plc held its place in the top five for a second year at 6.93 percent.

The poll is drawn from a survey of traders in the foreign-exchange markets and was based on 16,298 responses, representing $225 trillion of turnover, Euromoney said. Volumes covered by the survey declined 3 percent from last year on a like-for-like basis, Euromoney said. Electronic trading accounted for 45 percent of flows, up from 38 percent in 2012, it said.

“We’re obviously putting in a huge effort in Asia,” said Kevin Rodgers, global head of foreign exchange at Deutsche Bank in London. “We’re keeping the technological engines brand new and sparkling. Our target areas for growth are mainly in the corporate and real-money sectors” as well as electronic trading, he said.


Table 1: Foreign-Exchange Market Share (All Products)

Banks, by currency trading.

Source: Euromoney Institutional Investor Plc


Sinking Yen

Deutsche Bank’s market share climbed from 14.57 percent last year, and the top five banks grew their combined share, accounting for 57 percent of trading from 55 percent in 2012.

The yen sank almost 20 percent against the dollar in the past six months, the most among 16 major currencies tracked by Bloomberg, as Japanese Prime Minister Shinzo Abe called for expanded monetary easing and Bank of Japan Governor Haruhiko Kuroda pledged to double monthly bond purchases. It weakened 0.3 percent to 99.34 yen per dollar at 12:32 p.m. New York time.

The Japanese currency has been “probably the single biggest growth factor in the foreign-exchange market both in terms of options and the cash product,” according to Citigroup’s Feig.

Currency volumes jumped at the start of this year after a drop in the fourth quarter. Traders had the best month in almost three years in January, according to a Deutsche Bank index of currency returns as a weakening yen and resurgent euro boosted volatility in foreign-exchange markets from a five-year low.


"Proactive Steps"

JPMorgan Chase & Co.’s Group of Seven FX Volatility Index, a measure of currency fluctuations, has climbed to 8.9 percent from 7.06 percent on Dec. 18, the least since 2007. New Zealand announced it sold the kiwi yesterday, joining a growing band of countries from South Korea to Israel in escalating its response to a strengthening currency.

“Volumes have increased because of the proactive steps taken on the monetary-policy side by central banks across the globe,” said Adrian McGowan, head of foreign-exchange trading for Europe at Barclays in London. “Yen crosses have seen the biggest increase and we’ve also seen a very large increase in euro trading,” said McGowan, who also heads foreign-exchange forwards and options at the bank.

A survey by Greenwich Associates published in March also showed Deutsche Bank had the biggest share of the global foreign-exchange market as of November. The Frankfurt-based bank had a 10.7 percent share of the foreign-exchange market, according to a survey conducted between September and November.


Sustainable Revenue

HSBC narrowed the gap with fourth-placed UBS as its market share rose from 6.72 percent last year. Each of the top-four banks in the survey command more than 10 percent of traded volumes, according to Euromoney.

“We are keen to progress and reduce the gap but at our own pace,” said Frederic Boillereau, global head of foreign exchange and commodities in London. “It’s a balance between the market share and the quality, but more than anything it’s the sustainability of our revenue.”

The survey was the first for which Euromoney collected emerging-markets data. That represented 9 percent of all client transactions, it said.

Nomura Holdings Inc. was ranked top for Group-of-10 currencies research by “leveraged funds” and “real-money” investors, Euromoney said today. Deutsche Bank came first for emerging-markets research and State Street Corp. topped polls of quantitative and flow research among the same investor groups.

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