Foreign exchange: Barclays FX has its resolve tested

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By:
Trevor Carr
Published on:

Loses key personnel; Still maintains ambition to be top FX house

In the past decade Barclays FX has gone from a second-tier player to being a powerhouse that has its sights set on being the world’s number one FX provider. However, the recent loss of key personnel has called this ambition into question. In 2000, Barclays ranked a lowly 12th in the Euromoney survey, with a paltry market share of 2.07%. This year’s survey ranked it in third position, the same as the previous year, but closing the gap to the second-placed UBS with a market share of 11.08%. Moreover, it ranked second among real-money and leveraged-fund clients, and it consolidated number two position in the electronic markets, a key battleground for FX banks. Its Barx system, garnered a 19.4% share of the market, behind Deutsche Bank’s Autobahn’s 26.4%. In recent years it has been the momentum story in the FX market.

FX market leaders, then and now

2000Mkt. share %2010Mkt. share %
1Deutsche Bank12.53Deutsche Bank18.06
2Chase Manhattan8.26UBS11.30
3Citigroup8.07Barclays11.08
4Warburg Dillon Read5.02Citigroup7.69
5HSBC4.55RBS6.50
6Goldman Sachs4.38JPMorgan6.35
7JPMorgan3.94HSBC4.55
8Merrill Lynch3.27Credit Suisse4.44
9Credit Suisse First Boston2.89Goldman Sachs4.28
10 Morgan Stanley Dean Witter2.87Morgan Stanley2.91
11NatWest2.71BNP Paribas2.89
12Barclays2.07Bank of America Merrill Lynch2.27
Source: Euromoney

Departures

It is all the more curious then, that over the past 18 months, Barclays has suffered several high-­profile defections: George Athanasopoulos and Richard Longmore in sales; David Woo in research; Chris Purves, Mark Meredith and ­Parwinder Sekhon in quantitative and electronic trading; and, most recently, Andrew Kaufmann, who was global head of FX structuring.

"We’re very upbeat about our business and FX was singled out for its great performance in the last two interim results presentations"

Mike Bagguley, Barclays

Mike Bagguley, Barclays’ global head of FX trading
Mike Bagguley, Barclays’ global head of FX trading, plays down the departures as part of a general market trend and says that perceptions of a net exodus are incorrect. "In 2009 and 2010 there’s been more people movement between firms generally, but our overall FX headcount has been up," he says. Some of the hires have been internal, while Bagguley is at pains to stress that some of the re-staffing has been expedited by the transfer of both senior and up-and-coming staff from other areas. For instance when Athanasopoulos departed, Nick Howard transferred from the rates business to take over as global head of FX sales and emerging markets sales. "Nick was a top-quality leader in building out our fixed-income business, particularly in making that connection with top-level clients," says Bagguley. "He is replicating that performance in the FX and EM asset classes. Having both EM and FX sales together under him is highly complementary."

Of the prominent external hires, BarCap brought in Andrea Anselmetti from Goldman Sachs, after Longmore’s departure, and David Fotheringham was hired from Nomura when Purves, Meredith and Sekhon all left. Perhaps the highest profile departure was that of the well-­regarded Sean Comer, chief operating officer of the FX business, who left at the start of the year to work for Zar Amrolia at Deutsche Bank. He was replaced by Rick Sears, formerly chief executive of FXMarketSpace, where he was president and head of sales.

"Rick has a long association with the CME and the broader FX market. We feel Rick’s experience, gravitas and market standing will stand us in good stead in the years ahead as we push to become number one in FX and also in the face of the changing regulatory environment in the US."

But some FX recruitment specialists question whether the bank has increased headcount in FX. "Without question BarCap has had a high amount of leavers, only marginally less than RBS. That’s mostly due to uncertainty before the arrival of Andrea Anselmetti, and a lack of direction at global FX sales head level," one recruiter tells Euromoney.

Another views the moves as a natural, almost cyclical phenomenon. "You have to remember that Barclays went through a rebirth in 2005 to 2006 and was one of the biggest-hiring names – now the ‘change agents’ are probably trying to do the same elsewhere [Athanasopoulos, ­Longmore, Purves, Meredith, Sekhon and Kaufmann are all now at UBS]," the recruiter says. "Also, Barclays is not the big payer it used to be, revenues have come down and expectations are still at a high level."

Bagguley alludes to those high expectations – in particular Barclays’ long-term mission to overtake Deutsche and UBS in FX market share – and casts the staff changes in the light of a policy to accomplish that end: "We have tried to shape ourselves for the journey ahead in our mission to be the unquestioned number one bank in foreign exchange and to strengthen ourselves in the areas we felt we could do even more."

Ritossa’s powerhouse

Much of the credit for Barclays’ emergence as an FX powerhouse has gone to Ivan Ritossa, who joined the bank from Lehman Brothers in 2002. Now based in Singapore, he carries a mouthful of titles, as BarCap’s deputy head of fixed income, currencies and commodities (FICC) as well as global head of FX, head of FX prime services, head of e-commerce and head of trading in Asia. It is not just a multi-faceted role, but it is split across multiple time zones.

Some market participants have questioned whether this distracts his focus from FX, which is effectively centred in London, let alone prime services and e-commerce, which are run from New York.

One fund manager tells Euromoney: "Since Ivan Ritossa moved to Singapore three years ago Barclays FX has been under scrutiny. The market is looking for any indication that the bank has lost momentum, and losing people like Longmore adds fuel to that."

"I think that without question
BarCap has had a high
amount of leavers, only marginally
less than RBS. That’s mostly
due to uncertainty before
the arrival of Andrea Anselmetti,
and a lack of direction
at global FX sales head level"

Much of BarCap’s recent success has come from its innovative approach to FX e-trading. Key to that was the hiring of Tim ­Cartledge and David Cooney from Dresdner Bank in early 2004. Hired to run currency options, they also had ideas on how e-commerce could be organized at an institution with sizable deal flow. It was Cartledge and Cooney who developed the early algorithms whereby FX flows through Barx, could be optimally managed. And it was Cartledge, particularly, who developed Barx into the market-leading platform it has become today.

These days Ritossa leaves day-to-day running of the FX trading side to Bagguley in London and there is little evidence yet from Euromoney’s FX surveys to suggest Ritossa’s move to Asia has had a negative impact on its performance. Indeed, Bagguley thinks the bank will have increased market share yet again in 2010.

"We’re very upbeat about our business and FX was singled out for its great performance in the last two interim results presentations," he says. "We believe that this has been our year, our volumes are more than 50% higher than last year and it’s not only spot FX through Barx, it is also the voice business, and forward FX and currency options that have also both had a great year".

Technological imperative

All eyes will therefore be on the results of ­Euromoney’s FX survey next May to see if this proves to be accurate. If it is, it might be instructive about the changing face of foreign exchange franchises: It is less about the individuals, and more about the technology and functionality of the service provided in an increasingly electronic trading world.

That will please neither the banks in front of Barclays nor those that in last year’s survey thought they were closing the gap.

Perhaps it is just a case of "Schadenfreude regarding the defections and jealousy about the continuing ability to grab market share," says a fund manager. "Like every other market-maker platform Barx has good days and bad days but overall I don’t yet see any deterioration in service or pricing and liquidity."