Zar Amrolia: special focus
The foreign-exchange industry has been caught in a perfect storm of falling volatility, difficult trading conditions and regulatory challenges. Many of the senior figures in FX have stepped aside, leaving a new generation to come to terms with a radically different market.
Citi retains top ranking while Deutsche plummets; JPMorgan and UBS rise; top five market share at all-time low; non-bank FX providers make an impact on rankings
New specialist liquidity providers are nibbling away at the share of the big universal banks in more and more parts of the FICC markets. In swaps, government bonds, foreign exchange, credit, and in securities financing and repo, new entrants are on the march, stepping up to fill the gaps left by the retreating banks. Tech savvy, led by quants and data engineers rather than the expensive traders sitting on the scrap heap of most banks’ inferior tech, the new entrants now just need people with the skills to win over large numbers of customers.
At Deutsche Bank, a number of senior changes last year point to how seriously the bank is now approaching this field too. The new role of Zar Amrolia, Deutsche’s former co-head of fixed income and currencies, leading the development of digital technology within its corporate banking and securities (CB&S) business forms part of this.
Zar Amrolia, Deutsche Bank’s co-head of fixed income and currencies, will take on a new role leading the firm’s development of digital technology within its corporate banking and securities business.
Zar Amrolia, who drove Deutsche Bank to the top of the Euromoney FX survey over the past decade, is now co-head of FIC, a newly combined fixed-income and currency-trading division of the bank.
"The FX market is what I would call the perfect flow market, where you have a high degree of deep liquidity, electronic trading, straight-through-processing automation on the client side, the sales side and the risk management side... One of the most important areas that we think will define the most successful flow business of the future is the cross-market electronic trading platform."
Zar Amrolia, who has led the bank’s FX division to the number-one position in the Euromoney FX survey for the past eight years, has been promoted to co-head the bank’s newly created fixed income and currencies group.
Kevin Rodgers became responsible for the operation of Deutsche Bank’s global FX business on July 27, taking the place of long-standing FX head Zar Amrolia, who has become the head of a new unit at the bank called Markets Electronic Trading (MET).
“You can now build your own Autobahn for the functionality that you want as a client,” says Zar Amrolia, Deutsche Bank’s global head of foreign exchange. “It’s a very modular approach; a bespoke Autobahn. These days, you just can’t have a one-size-fits-all offering, you have to go bespoke.”
The results of this year's FX survey seem to suggest that appetite for the market-share fight is being tested. Market concentration is on the rise again, with the top five banks now holding 55% of market share. The largest FX flow houses are quick to jump on this as a crucial signal. "It’s an inflection point," says Zar Amrolia, global head of FX at Deutsche Bank. "The industry is fundamentally going to change in the next three to five years. What we do now, this year, is going to determine the winners of the next five to 10 years."
"Whereas in 2008 revenues were driven by wider bid-offer spreads, in the third quarter [of this year] they were driven by volumes," says Zar Amrolia, Deutsche’s global head of foreign exchange. "Bid-offer spreads have remained quite tight."
With electronic trading more important than ever, Zar Amrolia, Deutsche Bank’s global head of foreign exchange, says that investment in people and technology will keep the bank in the driving seat with Autobahn. He discusses the relative merits of single-dealer and multi-dealer platforms as Euromoney’s 2011 FX survey goes live.
"It’s true that the high-frequency community raised the bar on the banks in pricing and risk management and Deutsche Bank is responding by investing in our infrastructure to a point where we will compete on at least a level playing field," says Zar Amrolia, global head of foreign exchange at Deutsche Bank, which has secured first position in Euromoney’s FX survey for a seventh straight year. "You have to factor latency into your risk management. We resolved that and now we’re putting that in place."
Front (l–r): Fabian Shey (UBS), Zar Amrolia (Deutsche) and Ivan Ritossa (Barclays). Back (l–r): Martin Wiedmann (Credit Suisse) and Anil Prasad (Citi)
"We have no goals to achieve 100% internalization because it’s highly unlikely that you’ll make any money from that," says Deutsche’s global head of foreign exchange, Zar Amrolia. "We’re looking for the optimal point, whereby we internalize flow that we feel confident can be offset by our clients, internal traders, or where we benefit from favourable market moves, or we externalize flow into the general marketplace with low offset value, or be subject to adverse market moves."
"The secret here is how to be consistent when consistency is required and how to change when change is required. We have never taken our leadership position with clients for granted"
- Zar Amrolia, Deutsche Bank
When Zar Amrolia, now managing director of global finance and foreign exchange, first walked on to the then Deutsche Morgan Grenfell’s foreign exchange sales and trading floor in 1995, he wasn’t entirely sure that he had made the right career move.
Zar Amrolia, Global Head of Foreign Exchange at Deutsche Bank, commented: "Winning the Euromoney poll for the fifth year running is a clear testament that our business model is working. Market participants who assume that the flow business requires less intellectual property and ability than the so-called complex businesses are missing a trick. We believe the ability to differentiate ourselves by applying intellectual capital to the way we do flow has been absolutely central to our success."
'In the crisis, we were consistently there for our clients. We were really given a chance to differentiate ourselves from our competitors, which to an extent hasn’t been there in recent years, and we did that'
- Zar Amrolia, Deutsche’s global head of FX.
"I’ve heard those pessimistic comments [that FX is commoditized with limited growth potential] since at least the pre-euro days of the late 1990s and the answer is a definitive yes to continued growth," says Zar Amrolia, managing director global finance and FX at Deutsche Bank. "We’ve been consistently growing by double-digit percentages over the past few years, and by high double-digit percentages more recently – that’s hardly limited growth. I believe the FX market is the most competitive market, and that drives innovation."
Deutsche’s global head of FX, Zar Amrolia, waxes lyrical about the bank’s further success. “We won for the first time in 2000 and that was probably a goal in its own right. The goal now is to consistently innovate and add value to clients: whether it’s new ways for order management on our electronic platform or intelligently managing risk with derivatives or even creating benchmark indices for currencies, we challenge the status quo.”
The bank has sought to deliver what is seen by many as a holy grail in the market – cross-product margining. Zar Amrolia, the bank’s global head of FX, admits Deutsche did not pioneer this, but it was swift to bring in the expertise from outside once it saw it developing.
Zar Amrolia has been appointed global head of foreign exchange at Deutsche Bank. His promotion is one of a number of senior-level changes at the bank.
"We have exited some client relationships by mutual consent, and used the resources to acquire new clients or deepen existing relationships"
- Zar Amrolia, Deutsche Bank
An M&A-based spree: M&A-based forex does comprise an important part of Goldman Sachs' business though. Since 1986, the bank has consistently appeared in the top 20 in the Euromoney poll but has never before reached third. It's a result that Zar Amrolia, co-head of global FX, says is the product of several years' consistent focus on client needs. He stresses that there is no single explanation for the meteoric rise in market share - from 4.38% in 2000 to 7.09% this year. It seems likely, however, that a significant part of this is derived from investment banking related business. Amrolia himself says almost as much. "Last year was a bumper year for M&A," he says. "Let's not kid ourselves about that."
Deutsche's integrated business approach will be extended online in form of dbmarkets.com, a multi-product and multi-service system. "By August, institutional investors will be able to access research material and comments, trading strategies, analytical tools and can execute their strategies across a whole range of products," says Zar Amrolia, head of client e-business.
For all the obvious progress that has been made by a number of houses in developing internet trading systems, sceptics say so far the principal focus of the industry has been on achieving cost efficiencies for the banks themselves, rather than on delivering any sort of value added for the customer. Zar Amrolia, who recently moved from the foreign exchange business to become head of global e-business at Deutsche Bank thinks that "there has been a lot of froth and not too much substance about foreign exchange trading over the internet so far. The systems out there at the moment do not provide what customers really want, which is a co-mingled service providing prices from multiple banks combined with straight through processing." Instead, he suggests that many systems developed to date are often little more than "glorified e-mails".
As companies start looking beyond their national boundaries to define their success, the ability to offer a global service in foreign exchange is becoming more important. "Who corporates and investors view as their competition is changing," says Zar Amrolia, Deutsche's head of sales. "For example, a UK corporate is more interested in its hedging policy relative to other competitors in the industry sector in Europe or the US rather than other UK corporates."
Investors are still eager for range products despite higher pricing as a result of lower volatilities and the reduction in the number of banks in the market. "Even with present volatility levels there is still enough value to be extracted from range trades for people to be interested," says Zar Amrolia, head of global risk strategy at Deutsche Morgan Grenfell in London.
Star climber: The most explosive new entrant to this year's top 10 is a bank that did not appear even in the top 20 last year: Deutsche Morgan Grenfell. It comes in at nine. In derivatives, Zar Amrolia was brought in - with a whole sales team from CSFP - to run global options sales