2014 Forex volume controlled by 5 banks

KPMG,Alpari UK, Confidential Information MemorandumBig banks have always been the largest players upon the foreign exchange markets. Nowadays, this given fact still has remained unchanged. Backed with the research from Greenwich Associates, it has been reported that about 5 top banks are having the market in hand, their operations account for over 50% of the aggregate FX volumes on an annually basis.

In 2013, the total market share of these top 5 banks was 53%. Their percentage control of the industry reduced to 51% as ceded part of the 2014 Forex volume . A reduce of 2% is significant, considering that this represents several trillion dollars. Since the market is measured in the hundreds of trillions with average daily turnovers of over $4 trillion. The top five banks according to volume turnover is: Citigroup Inc., Deutsche Bank AG, UBS Group AG, Barclays Plc., JPMorgan Chase & Co.. Among these five banks, an aggregate of 51% of client trading volume in 2014 is seen to have gone through them.

Greenwich Associates came about these findings by interviewing and researching 1,612 top-tier users of FX at large corporations and financial institutions, from North America, Latin America, Europe, Asia, Australia, and Japan. This research was carried out between September and November of 2014.

According to the firm’s definition and standards, which is considered to be top-tier, a firm must meet one of the following criteria: be a fund manager, a hedge fund, a central bank, a retail aggregator, a Fortune Global 500 firm or a treasury center. Other criteria that have been issued for participating in the research are: the participant needs to have trading volume of more than $10 billion; or have sales of more than $5 billion.

Greenwich associates summarized its motive for the paper thus: “As clients will continue to need the global reach of the largest money-center banks, the top four FX dealers seem firmly entrenched. Nevertheless, the market structure disruption that is upon us, combined with an increasingly volatile currency market, is making room for the rest of the top 10 to wrestle away share slowly but surely—both on the screen and on the phone. In an evolution similar to Amazon’s, multidealer platforms will increasingly become the primary place to transact.”

Amidst the ongoing war on the Forex market manipulation by various regulators, which has already led to fines topping $4.3 billion, it is likely that most of the dealing operations of these banks will gravitate towards more automated trading activities.

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