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Foreign Exchange

Inside FXMarketData: Japanese banks ramp up real money effort

FX volumes executed by Japanese banks have shown a marked improvement in recent years. The biggest improvers in market share in Euromoney’s FX survey this year were Nomura and Mizuho Financial Group, registering increases of 97% and 68% respectively. That saw Nomura rise four places to 14th and Mizuho rise 11 places to 23rd. This rapid improvement is due to one dominant factor: doing more business with real money clients.

Nomura and Mizuho were the stand-outs, but this is the trend across all the nation’s banks, Euromoney market data shows. Bank of Tokyo Mitsubishi UFJ (BTMU) boosted its share of the worldwide real money wallet, improving its standing from 26th to 14th in the global rankings, while Sumitomo Mitsui jumped from 46th place to 21st. That helped BTMU break into the top 20 FX banks for the first time, with its total volume rising above the $1 trillion mark.

Nomura’s outperformance reflects two things: its broader global expansion and the worldwide rollout of its electronic execution platform, which has enabled it to take on more real money customers than its rivals. It registered its real money gains in Western Europe, where it rose from 36th place in 2010 to 10th place this year. However, in terms of Japanese real money accounts, it lags behind local rivals. Its closest FX rival, BTMU, made its overall gains with local real money clients, as did Mizuho – in this market they rank second and third respectively, behind JPMorgan, which knocked Deutsche Bank off its top position. 

Japan banks' global rankings, Euromoney FX Survey 2007-2011

 
Blue line: Nomura; Yellow line: Mitsubishi; Green line: Mizuho; Orange line: Sumitomo

Source: Euromoney FXMarketData

Both BTMU and Mizuho are now looking to replicate Nomura’s global ambitions by developing their own e-trading platforms. “We have a single bank platform that will be live by the end of the year,” says Mark Walker, BTMU’s London-based head of spot and forward G10 FX trading. In the meantime, the bank has been streaming prices to the wider market through multi-dealer platforms.

Furthermore, Walker attributes BTMU’s volume increase this year to a restructuring of the bank’s global sales desk and a renewed focus on competitive global pricing.

And good relationships have clearly reaped dividends in the Japanese real money space, with BTMU’s traded volumes soaring from $100 billion in last year’s survey to $635 billion, comfortably the top Japanese bank (see chart), enabling it to increase market share from 12% to 15%.

Mizuho’s progress with Japanese real money clients makes it the most improved in terms of market-share gains in Japan, increasing its real money trading volumes from $32 billion to $500 billion in the 2011 survey, and jumping from ninth position to third.

“We've been working hard with real money clients recently,” says Hokuto Nakano, general manager of the bank’s FX division in Tokyo. He also emphasizes the importance of a clear e-trading strategy. “Systems make or break our business,” says Nakano. “E-commerce strategy is one of our strongest focuses at the moment. We have an in-house developed FX Web for domestic customers and we are adding finishing touches to a global version, which will be released in late summer as a part of our expansion.”

Mizuho has made key hires, adding two full teams in Tokyo: an Asian and emerging-markets trading team in 2010, followed by a global forex sales team this year. “We’re making an extensive effort to expand our business base globally,” says Nakano. “This is to establish a competitive beachhead towards this goal.”

Meanwhile, in the latest survey Sumitomo rose six places to fifth position with Japanese real money clients. Sumitomo had no-one available to speak to EuromoneyFXNews for this story.

While Nomura may be the Japanese model for global expansion, it is now also turning its attention to the traditional core domestic client base of BTMU, Mizuho and Sumitomo. It jumped seven places to 12th position with Japanese non-financial corporate clients this year, while BTMU and Mizuho both lost market share. Sumitomo gained two places to fifth, registering volume of $96.4 billion, while Nomura’s stood at $15.6 billion. BTMU polled second (behind Barclays Capital), with $123.6 billion, though that was down from $163.2 billion in 2010.

As EuromoneyMarketData figures show, corporate business still accounts for less than a quarter of volumes for all three banks (see chart), but it’s still lucrative business worth chasing as far as Nomura is concerned.

Richard Gladwin, Nomura’s global head of FX, tells EuromoneyFXNews that the challenge has been to convince corporate Japan that a traditional securities brokerage house can execute FX business just as well as a commercial bank.

“It’s somewhat hard to believe that we don’t have the biggest footprint in FX with Japanese corporates,” he says. “We’re a force in investment banking, but there is a mindset with Japanese corporates that FX is a bank’s business, not a securities-house business. We’ve spent the last two years convincing our clients that actually we can deliver a service as good as, or frankly better than, all of the mega-banks in the FX space.”

 Global real money business among Japanese banks, 2010-11

 
Blue line: Nomura; Yellow line: Mitsubishi; Green line: Mizuho; Orange line: Sumitomo

Source: Euromoney FXMarketData


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