Banks Diverge in Chase for Profits in Global FX Trading

Change remains the defining characteristic of global currency markets-at least in terms of the battle among banks for market share in FX trading.

For the second consecutive year, significant market share was redistributed among the dealers in the top ranks of the FX market in 2016, with some leading dealers adding as much as two full percentage points in market share and others ceding similar amounts.

Meanwhile, the number of banks within that top rank expanded considerably. The 2017 Greenwich Share Leaders in Global Top-Tier Foreign Exchange include J.P. Morgan with the top spot, followed by Citi, UBS and Deutsche Bank. Tied for the fifth spot are Bank of America Merrill Lynch, Barclays, HSBC, and Goldman Sachs.

Bank of America Merrill Lynch, Citi and J.P. Morgan are named the Greenwich Quality Leaders in Global Top-Tier Foreign Exchange Service. Bank of America Merrill Lynch is named the 2017 Greenwich Quality Leader in Global Top-Tier Foreign Exchange Sales and the 2017 Greenwich Quality Leaders in Global Top-Tier Foreign Exchange Trading are Citi and J.P. Morgan.

For its 2017 study, Greenwich Associates conducted interviews with 2,393 corporate and financial users of foreign exchange around the world about market trends and their relationships with their dealers. Of these, 1,536 are considered top-tier accounts. Study participants were asked to name the dealers they use for foreign exchange and to rate the quality of service these dealers provided. Dealers receiving quality ratings topping those of competitors by statistically significant margins are named Greenwich Quality Leaders.

Focus on Profitability

Driving the major shifts in the FX competitive landscape is a single question: Whats the best way to make money in FX? Although that question is simple, the answer is not. In fact, banks are coming up with radically different answers about how best to generate profits in FX.

Some banks, like J.P. Morgan, which climbed to first place in the global market this year, Citi, which held share with financial accounts and earned the top position with corporates, and HSBC, which was not previously an overall Greenwich Share Leader and secured a spot on the list this year, are generally hewing to broad-based global strategies and capturing market share along the way.

Some leading FX dealers are narrowing the scope of their coverage and focusing on specific products while some are focusing their strategies on particular clients, often targeting their resources toward banks, hedge funds and other financials, or retail aggregators. Finally, some banks are becoming much more discerning about the channels in which they compete for business.

In some cases, banks that have lost market share at a market-wide level have actually gained share in their areas of focus, which presumably represent the most profitable parts of their business, says Greenwich Associates Managing Director Woody Canaday.