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Foreign Exchange

FX: Deutsche's need for speed

Top-ranked foreign exchange house Deutsche Bank aims to consolidate its leadership with a new twist on APIs. Rivals say the development is spin rather than substance. In a market where technology plays such a vital role, they’ll be hoping they’re right.

Deutsche Bank has upped the ante in the technology race raging among the world’s largest FX banks as it seeks to extend the lead it has held in the industry for the past eight years.

Superior trading technology has been one of the pillars that have given Deutsche its competitive advantage in FX and enabled it to be the undisputed leader over the past decade in a sector that has the most attractive return on equity of any global markets business.

But that lead is being eroded. In 2008 Deutsche commanded almost 22% of market share in FX. That has now fallen to 14.55%, and the gap between Deutsche and Citi, the second-biggest FX bank, is now just 2.2 percentage points, compared with six points in 2008.

Size matters in FX, which according to consultancy firm Coalition is making an increasing contribution as a proportion of banks’ total fixed-income, currencies and commodities revenues. In 2009, FX accounted for 16% of total FICC revenues; that had risen to 27% by the end of 2011.

So Deutsche’s lead is a prize worth defending. In an effort to extend it, the bank has unveiled the second phase of its FX trading platform, Autobahn, by introducing a new application programming interface (API) that it says will revolutionize how it prices and risk-manages its currency-trading business.

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