The top five dealers in global foreign exchange (FX) trading collectively ceded market share to rivals last year, reports Greenwich Associates.
With an aggregate share of 51% of global FX trading volume in 2014, the top five of Citi, Deutsche Bank, UBS, Barclays, and JP Morgan still maintain a dominant grip on the market, but that share was down from 53% in 2013.
This shift was among the key findings of a recent Greenwich Associates study of 1,612 top-tier users of global FX, with the results included in the newly-released report entitled
‘Top FX Dealers Still Dominate but Cede Market Share to the Middle’
“While the loss of market share appears small, two percentage points in a market with turnover measured in the hundreds of trillions is a big deal,” said the firm’s consultant Woody Canaday.
Trading business lost by the top five dealers was picked up those ranked from sixth to tenth in terms of market share, which as a group captured 24% of global trading volume in 2014, against 22% in 2013, while dealers ranked 11-20 saw aggregate share inch up from 14% to 15%.
Technology plays a major role in dealers’ competition for market share. Three-quarters of client volume in FX is done electronically, a ratio that has risen consistently since before the financial crisis. The movement of trading business to multi-dealer electronic platforms has broadened the market. The average number of dealers used for FX trading by buy-side clients has increased to more than eight in 2014 from 6.5 as recently as 2009. This level of counterparty expansion would not have been possible in a purely bilateral market.
The top four dealers have a market share in electronically traded FX that is on average 45% higher than their share in the voice-only market. In contrast, dealers 5-7 have an average voice market share 5% greater than their e-trading share, while dealers 8-10 have a voice share that is one-third higher than their electronic share.
“To be globally dominant in FX, an electronic trading franchise is of critical importance,” said Kevin McPartland, head of market structure and technology research at Greenwich Associates.
“Connectivity to clients and multi-dealer platforms, aggressively priced streaming quotes, trading analytics, and a top-notch single-dealer platform are all needed.”
There are various ways for financial institutions to benefit from advanced technologies and business models provided by FinTech's. Whether a business' approach is radical or incremental, data management can help a company to increase their return on investment, argues André Casterman, INTIX.
Due to the low interest rate environment and Basel III regulation many corporate treasurers, who may have in the past been very reliant on the banking sector to provide them with cash management solutions, have been forced to explore alternative options as banks have been refusing short dated cash deposits.
Far and away, the largest financial market on the planet is the foreign exchange currencies market, where on average individuals and organisations trade more than $5 trillion daily. In the FX world, the ability to master the market isn't considered a luxury for treasury officers–it's a necessity.
Apps are a critical part of treasury's shift into mobile banking as 67% of treasury and corporate finance professionals said mobile banking services are of particular interest to them in a recent survey.