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Foreign Exchange

Euromoney FX survey 2011: Nomura wins most improved market share

The bank has leapt 43 places in the Euromoney FX survey since 2009. It earns the title of ‘most improved market share’ after rising four places this year. Can the momentum continue? Hamish Risk finds out

In 2009 Nomura ranked 57 overall by market share in Euromoney’s FX survey; by 2010 it had jumped to 18, this year it has pushed on to 14, allowing it to pick up the award for ‘most improved market share’. Three years into building its FX franchise, practically from scratch, Richard Gladwin, Nomura’s global head of FX, believes the bank is on track.

Yet the bank has not broken into the top 10 in any geographical region or any particular market segment. Its strongest area of growth, by region, was Europe, registering a 221% volume increase. The bank, though, is focusing on its achievements.

It improved its real money market share by a staggering 1,238% over last year. Way behind it in second place is Japanese rival Mitsubishi UFJ , up 600%. Nomura’s ranking among real money clients consequently improved from 37th place in 2010 to 13th this year. Its position among leveraged funds and banks remains unchanged.

“This was the year that we were always going to make a lot of progress with real money,” says Gladwin. “Clearly it’s a big part of the FX business and clearly, without those clients, we were always going to struggle to make much more progress than we did last year.”

Gladwin says Nomura has followed the natural order of bringing in new clients. First came the banks and, to an extent, hedge funds, which were quick to get up and running in 2009 via prime brokerage. Real money takes longer because of the more onerous process of becoming a trading partner. Gladwin thinks that Nomura’s success with in that sector has only started to kick in over the past six months and he is expecting more progress next year.

Richard Gladwin
Harder climb

Nomura has momentum, but can it continue? Competitors argue that the firm has picked all the low hanging fruit now that it has hired a large team of good professionals and built a state-of-the-art electronic trading platform.

But Gladwin isn’t deterred.

“Do I believe that we can become a top 10 player in foreign exchange? Yes I do,” he says. But getting to the top is also partly out of the bank’s hands.

Gladwin is thinking of how regulatory changes may play out. “Some of those things may favour us, such as the introduction of central clearing in some of the businesses,” he says. “Given our credit rating relative to some of our competitors, it will actually improve our standing quite significantly. They will be more inclined to deal with us on a cleared basis rather than on an OTC basis.”

And there is another sector that Nomura will need to tackle if it is to join the top league: corporate customers. Gladwin says that until now, the bank has been too busy. “We had enough on our plate, but it’s a big focus for us this year,” he says.

Nomura has hired Danny Kinnear, formerly of BNP Paribas, to spearhead its efforts in Europe. Success has come already in Singapore, too, with some key corporate accounts, many of which are big users of derivatives.

In Japan

It is hard to believe that Nomura doesn’t have much of a presence in foreign exchange in its home market, but, while it is a force in investment banking and securities, the firm has a way to go in proving to Japanese corporates that FX isn’t just a service provided by big commercial banks.

“We’ve spent the last two years convincing our clients that we can deliver as good – frankly, a better – service than all of the mega banks in FX,” says Gladwin. He points to the recruitment of Yoshihiro Miura, from JPMorgan, to lead corporate efforts in Japan and plans to build a corporate team of at least four people.

Without the advantages of being a big domestic lender, Nomura’s focus is on derivative solutions and links with the investment bank to leverage its research group. Perhaps it best weapon, Gladwin claims, is that it has the best electronic platform of all Japanese banks.

Indeed, buy-siders tell EuromoneyFXNews that Nomura has produced a state-of-the-art system, but has been selective about who gets to see it. Gladwin says this is because the firm wants to focus on service rather than price.

“The e-commerce arena is hugely competitive. To provide suicidal pricing for every client doesn’t make sense,” says Gladwin.

“In the context of our overall client service, there are many clients for whom we’re very happy to show ultra competitive pricing because of our own overall relationship and business we do elsewhere.”

Gladwin takes the example of a Goldman Sachs to emphasise where he thinks Nomura should position itself: “If you look at the successful businesses, especially the ones that are not the flow monsters, such as Goldman for instance, they’re all firms that have combined servicing clients with taking risk. I think we would count ourselves in that category.”

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