Deutsche Bank AG was dethroned after a nine-year reign as theworld's biggest currency trader by Citigroup Inc., a EuromoneyInstitutional Investor Plc survey showed, as subdued volatilitydepressed trading in the euro.

Citigroup, which last led the ranking in 2002, claimed 16.04percent market share, beating Deutsche Bank's 15.67 percent,Euromoney said in a statement. The U.S. bank trailed its Germanrival by just 0.28 percentage point in the 2013 poll, thesecond-slimmest margin since it began in 1976. Barclays Plc was thethird-largest trader, with a 10.91 percent share.

The biggest dealers in the $5.3 trillion-a-day foreign-exchangemarket are facing reduced revenues after stimulus efforts bycentral banks around the world muffled many of the trends thattraders and investors use to make money. That's adding tocompetition among banks, which are pushing more trading ontoelectronic platforms to boost market share.

“We're a big euro bank and it's not helped that the euro has notbeen a focus of attention over the past 18 months,” said KevinRodgers, global head of foreign exchange at Deutsche Bank inLondon. “Currency volatility in my career hasn't been down at theselevels for any length of time, ever. What will cause it to bounce,I don't know.”

The euro traded in its narrowest range against the dollar sinceits 1999 debut in the last week of April, moving just 0.7 U.S. centbetween $1.3785 and $1.3855. Three-month implied volatility on thecurrency pair dropped to 5.5475 percent on May 2, the lowest since2007.

The Euromoney rankings are drawn from a survey of traders in theforeign-exchange markets. This year's was based on 14,050responses, representing $225 trillion of turnover, London-basedEuromoney said. Deutsche Bank was ranked number one since 2005.

The Frankfurt-based bank jointly led a survey of 2013 marketshare published by research company Greenwich Associates in March,along with UBS AG.

Citigroup's move to the top spot “is a validation of ourcontinuing effort to better serve our clients by providing them thebest pricing, trade execution and advisory services,” Nadir Mahmud,the bank's global head of foreign exchange and local markets, saidin an e-mailed statement. The bank headed the rankings for thesurvey's first 23 years, according to Euromoney.

Trading Heads

Citigroup named Mahmud as successor to Anil Prasad in February,agreeing for him to move to London from Singapore, where he led thebank's markets business in the Asia-Pacific region. Prasad left to“pursue other interests,” Citigroup said at the time.

Deutsche Bank's Rodgers will retire in June to focus on academicand musical interests, according to the Frankfurt-based lender.

Mahmud assumed his position against the backdrop of allegations,first reported in June by Bloomberg News, that traders at currencydealers colluded to manipulate benchmark rates. More than 30 peoplefrom 11 firms having been fired, suspended, taken leave of absenceor retired since October, when regulators said they wereinvestigating the market, according to data compiled by Bloomberg.No firms or individuals have been accused of wrongdoing bygovernment authorities.

Citigroup has the most revenue at risk from trading currenciesas officials investigate the allegations, according to Sanford C.Bernstein & Co. It gets roughly 4 percent to 5 percent ofrevenue from currency trading, according to a report yesterday fromJohn McDonald, an analyst at Sanford Bernstein.

Mark Costiglio, a bank spokesman, declined to comment on theBernstein report.

“The macro challenge is for FX market users to be confident thatit is a legitimate, transparent and fair market to operate in,”said James Wood-Collins, chief executive officer of U.K.-basedcurrency manager Record Plc. “It's an exceptionallywell-functioning market. It's particularly important our clientsare aware of that and aren't put off sensible risk management orreturn-seeking activity.”

Subdued price swings are starting to take their toll on bankearnings. Foreign-exchange revenue at Deutsche Bank dropped in thefirst quarter “due to lower client activity reflecting lowervolatility and challenging trading environment,” it said in itsApril 29 earnings statement.

Tighter Grip

JPMorgan Chase & Co.'s Group of Seven FX Volatility Index, ameasure of currency fluctuations, touched 6.00 percent today, theleast since 2007, and down from last year's peak of 11.96 percentset on June 24.

The top five banks are tightening their grip on the market,according to the Euromoney data. Their combined share accounted for61 percent of trading, up from 57 percent in 2013, and exceeding 60percent for the first time since 2009.

UBS was ranked fourth with a market share of 10.88 percent andHSBC Holdings Plc was fifth with 7.12 percent.

Barclays, which announced yesterday it would cut 7,000 jobs atits investment bank, said earlier this week a decline in revenuefrom trading bonds, currencies and commodities cut the division'searnings by 49 percent.

“In FX we've been through a couple of years of very fiercecompetition amongst the top three dealers,” said Mike Bagguley,head of macro products at Barclays in London. “So you've hadstagnant volumes, very low margins and very low volatility, whichhave clearly been disruptive for revenue. There's no way you'regoing to make a good return for your bank in this business unlessyou're a really efficient scale provider.”

Bloomberg

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