Citigroup wins the award for best foreign exchange bank this year, following its success in the Euromoney poll in May. A total of 659 institutional investors and corporates took part in the survey, which revealed that Citigroup captures the greatest share of the forex market with an estimated 10%.
During its brief period of relegation – Deutsche Bank won last year – Citi has implemented a number of initiatives designed to ensure its crown doesn’t slip again. In particular, managers have been extremely active in trying to maximize the deal flow to CitiFX from the different areas of Salomon Smith Barney, as well as the consumer bank arm of Citigroup.
A joint venture with the investment bank has been put into place to make sure that foreign exchange transactions, such as those that are part of an M&A deal, find their way to CitiFX. AutoFX – an automated dealing platform – is another joint venture that has been established in conjunction with the bank’s custody department.
Every time a client’s portfolio changes, AutoFX automatically handles the currency element.
Deutsche’s victory in the forex poll last year came in the wake of a period of strong activity in the hedge fund market. Citigroup took its cue from Deutsche’s success in that area and in October 2000 established a prime brokerage business, aimed at capturing business from this corner of the market. “We’re continually looking for ways to improve the service we offer to hedge funds and I suspect [the prime brokerage] has helped,” says Richard Moore, head of foreign exchange. The business provides hedge funds with leverage, execution capabilities and other ancillary services related to foreign exchange.
The second prong to Citigroup’s strategy is its research capability. Forex users also voted Citi best at currency strategy, economic and technical research. One of the elements that Moore thinks gives his team the edge is Citiflow. “We’re immensely proud of the Citiflow product,” he says. “We think it is extremely useful to our customers given our market share.”
Besides the common-or-garden macro-economic and technical analysis, Citi’s research team studies data from 35 trading floors worldwide in an attempt to identify consistent relationships between trading flow from their client base and future price movements. The idea is to help customers plan their currency strategy on the basis of how currencies have behaved in the past.
Citigroup’s victory in this category also rests, in no small part, on its success in e-commerce. It has developed a particularly comprehensive customer website – CitiFX interactive.
Clients are now able to access a wide range of services via its website including a library of research, Chief Dealer, which is the bank’s internet trading platform, and a stable of analytical tools.
Moore admits that online FX trading has not fully taken off yet but, he says, “we’ve already increased our volumes through electronic pricing – volumes we might not have seen through more traditional channels.” Nevertheless, he continues, “the bigger trades tend to come when you’re involved in decision making at a higher level, whether that’s M&A related or balance sheet related, it will be a discussion that leads to a trade.”
Besides developing its proprietary platform, Citi is also involved in a number of the major multibank platforms. It is a founder member and one of the largest shareholders along with Deutsche Bank, JPMorgan and Reuters in Atriax, the foreign exchange e-marketplace due to start trading at the end of June. It is also a partner in Volbroker, an electronic platform for FX options. So however the online market develops going forward, Citigroup has its bets well hedged.
