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| FX Survey 2012: Results index |
Despite falling short of overtaking Deutsche Bank, Citi continued its recent strong run in Euromoney’s FX survey, leapfrogging Barclays and UBS to take second position. The bank’s plan to take its FX division back to the summit, a position it last held in 2002, is paying dividends. “This is not a one-year move,” says Anil Prasad, Citi’s global head of FX and local markets. “It’s the culmination of a three- to four-year serious effort to focus the entire global foreign exchange business on moving up in market share.”
Citi’s performance is all the more impressive given that as recently as 2009, a dark period for the bank overall, it had been cast aside from its main rivals, sitting in fifth position and 13 percentage points off the lead. Without a serious electronic offering, and hampered by a federal bailout and a damaged credit rating, Citi, under the leadership of Prasad, hatched a plan.
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| Anil Prasad, Citi’s global head of FX and local markets |
Prasad says: “We got to a point where we were definitely the most profitable FX business in the world, and now we have to concentrate on getting our market share to the top.”
The FX group’s senior management realized that it needed to overhaul its electronic offering and increase its penetration in the bank sector to get to the summit. The bank acknowledged it had to take better advantage of its emerging markets franchise and also develop its prime-brokerage capabilities.
“We sat down and said we want to deepen our relationships with our clients,” says Jeff Feig, global head of G10 FX.
Deepening relationships means increasing Citi’s wallet share and that certainly appeared to be happening last year as the introduction of its Velocity 1.9 single-dealer platform in 2010 gained solid traction and played a big part in delivering record volumes.
The survey shows that Citi’s spot volumes rose by 51%, swap volumes were up 87% and it also made progress on nearly every front, across client segment and geography. It rose to second from fourth position in electronic trading, lifting its market share from 11.04% to 14.8%, and raised its market share among banks from 8.2% to 11.95%.
Citi’s efforts to boost its prime-brokerage offering also paid dividends: its market share among retail aggregators rose from 10.26% to 17.02%, while it moved from fourth to first among high-frequency firms, taking its market share from 9.43% to 23.2%.
A key part of Citi’s strategy to boost its market share came in more aggressive short-dated FX swaps pricing over Velocity, vital to attract business from the ultra-price-sensitive bank sector, a good showing in which is necessary to make an assault on the top ranking. Citi rose from fourth to third in swaps, lifting its market share from 7.84% to 12.39%.
Feig says Citi would have happily made a loss on swaps to increase market share and grow its spot business with banks. “But we didn’t. We made money on it,” he says. “It’s not hugely profitable on a per-million dollars basis, but we do a lot of volume.”
Geographically, Citi made progress in all the main regions, with a particularly strong showing in Asia, where it moved from third to second slot, increasing its market share from 10.18% to 14.86%.
Unsurprisingly, given the growth in volumes in Asia – not just in G10 FX but also in local currencies – the region is a main focus for Citi and one where it believes its global footprint, with an extensive local presence across the region, gives it an edge.
This year Citi expects to make further progress, helped by its revamped electronic trading platform, Velocity 2.0, which it launched in January.
Feig believes that Citi can emulate Apple’s fabled ability to give customers products that they don’t necessarily know they want until they get them.
He says Citi, which has invested in a new innovations centre in Israel to develop its trading technology, has some great ideas that are going to make its trading platform much more compelling to clients. “We are not stopping,” he says. “In the electronic space, you ain’t seen nothing yet.”
Of course, that product development is expensive but Feig believes there is never a time to sit back and milk an investment.
Feig says Citi’s competition is not just other banks but also a few high-frequency funds, which have succeeded because of focused investment on the technology required to be the fastest traders and the best predictors of short-term price movements.
“If you can’t be as fast as they are, if we can’t predict the way they can, they could dominate us,” he says. “We are not going to let that happen.”
