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The share of the top 10 banks in the foreign exchange market has been quite consistent, looking back over the last five years. The top ten had 79.68% market share in the 2009 survey, and they have 79.31% between them this year. At the lowest point in the cycle since the financial crisis, they had together 77.35% in 2011. The first nine banks are in exactly the same positions in the 2013 survey that they occupied in 2012, with the only newcomer to the top 10 in at the very bottom of that group. This was Bank of America Merrill Lynch, which has risen two places from 12th in 2012, overtaking Goldman Sachs and BNP Paribas.
Citi is once again the bank that has pumped up its volumes the most. Remember that the overall market sample captured by the Euromoney survey this year is 8% up on the 2012 total. Citi’s volume is 31.32% higher this year compared to last. And while Deutsche Bank has also seen volumes rise this year, up 12.62% on the 2012 survey, and has increased its overall market share by just over half a percentage point, Citi’s overall market share is up by two and a half percentage points.
Five years ago, the 2009 survey showed Deutsche to be the unchallenged market leader with an eye-catching 20.96% share and annual volumes of $36 trillion. That volume figure is above this year’s survey figure for Deutsche, which is $34 trillion. Back in 2009, UBS was second with a 14.58% market share. Citi was fifth with just 7.32%. Citi has now doubled its share in the world’s biggest financial market in just five years, for many of which it was fighting to rehabilitate itself from the after-shocks of the financial system crisis while under partial state ownership.
The FX market may look static. It isn’t. You just have to look over longer periods than 12 months.
Looking at an even longer term trend, let’s remember that Citi, with its unrivalled presence in 100 countries, dominated the Euromoney foreign exchange survey from its inception in 1979 until 1999, when it led with a 7.75% market share. Today, that would merely nestle it at the front of the chasing peloton, tracking the race leaders from back in fifth place. Back then, even though all the talk was of consolidation as it invariably is, the market was far more fragmented. The top four banks commanded just 38.4% of the market between them, compared to 50.4% today, and the top 10 had only 52% market share in aggregate, as against 79% today.
Deutsche toppled Citi in 2000, leaping from 7.12% for 1999 to 12.53%. Deutsche timed its great push to coincide with the rising prominence of institutional investors using derivatives to express views on currencies, surpassing volumes from corporations hedging through forwards.
Increasing electronification of spot currency trading dominated the years that followed and the banks that embraced this technology won. Barclays never topped the table but came from outside the top ranks (it was 16th in 1999 with a market share of just 1.88%) to establish itself comfortably as a regular member of the top four, largely on the back of its Barx electronic trading and distribution platform.
Even though Citi clawed its way back to the top in 2001 and 2002, UBS, another early e-forex pioneer, was gaining market share and enjoyed its time in the sun at the top of the tables in 2003 and 2004 before Deutsche returned in 2005 with a commanding 16.72% market share. Deutsche has been at the top ever since; its share peaking at an astonishing 21.7% in the 2008 survey that was compiled in the months after the sub-prime crisis broke, but before Lehman had collapsed.
