Smaller banks bite back
If you listen to the biggest foreign exchange banks, the smaller banks are on the brink of forex oblivion. They reckon any bank with a market share of less than 3% might as well give up now. And luckily enough, most of those big firms have shiny forex outsourcing agreements that the little chaps can just step right up to and sign as soon as they do decide that they just can't compete, bless them.
There is some logic to this. In foreign exchange, high volumes drive high volumes. A bank that handles a significant chunk of turnover in a good range of currencies is in a good position to offer high-quality flow-based analytics and currency overlay services to clients. This is especially important to banks trying to tap into the lucrative client bases of hedge funds and real money accounts.
On the other side of the coin, that logic says that if a bank handles weaker volumes, it cannot offer decent analysis, and will be pushed into niche business. But smaller forex banks do not necessarily offer inferior service, and are not necessarily less profitable.
A top-bracket contender
BNP Paribas is just on the edge of the list of big hitters in forex, ranking 13th overall for market share, at 2.72%.