Euromoney report on FX volumes and insights from Kevin Rodgers


Euromoney-Institutional-Investor-logoAtoZForex.com Lagos – Deutsche Bank’s former head of FX, Kevin Rodgers has given an interesting insight into his expectations for the industry going forward as well as opinions on likely innovation, comprised with his thoughts about developments in the industry based on the latest Euromoney report.. According to the latest Euromoney research findings, the top three of Citi, Deutsche Bank and Barclays remain unmoved in the ranks based on FX volume. The top 10 banks in 2014 are still the top 10 banks in 2015. In the places below the podium, JPMorgan and Bank of America Merrill Lynch rise while UBS and HSBC fall. RBS, once one of the mainstays of the top five, is on the verge of falling out of the top 10. And that top 10 looks an increasingly distant dream for the likes of Morgan Stanley and Credit Suisse, which would have been racing certainties for that position a few years ago.

Based on the Euromoney report on FX volumes, it was found that same banks dominate electronic trading and options. An interesting development though is the fact that HSBC knocks Citi off top spot in a very close race in the corporate sector.

Kevin RogersKevin Rodgers commented about the consistent drop of RBS from the ranks over the years, noting that: The one bank where the market-share movements in this survey do appear to be unquestionably part of a larger, longer-term pattern is RBS. Falling two places from eighth to 10th in overall share is a continuation of its steady fall from fourth in the 2009 survey. However, its retained hold on fifth in Corporates looks to be evidence of a strategic shift to its core customer base. No doubt this is a result of obeying the wishes of its owners, the UK government.
As for his opinion on the prospects of future developments in the industry, he said: The same long-term forces are at work on the market as always have been. First, there is the continuing impact of technology. It is instructive to look at the concentration of market share in various client and product categories in this light. The top five banks in electronic markets, a sector dominated by high-frequency trading clients, take nearly 60% of volume.
FX volatilitySpeaking on the changing level of volatility in the markets, he said: In the last couple of months of my career in the summer of 2014, FX volatility descended to unprecedented, record lows (Deutsche’s CVIX index of volatility, which normally averages around 10%, fell to 5.2%). There was real concern that central banks may have succeeded in squeezing volatility out of the market permanently. We shouldn’t have worried. Although its effects are not visible in the 2015 survey, the SNB’s shock decision to abandon the EUR/CHF floor and the chaos that ensued will be of immense importance since it signals the beginning of the end of central banks’ willingness and ability to impose calm. With continued uncertainty around Greece, the UK talking of an EU referendum, and the likely start of rate hikes in the USA and elsewhere, it looks to me as if volatility is back to stay.

As regards the ongoing FX manipulation investigation and the recent shock SNB decision of January 15, he said: Although its effects are not visible in the 2015 survey, the SNB’s shock decision to abandon the EUR/CHF floor and the chaos that ensued will be of immense importance since it signals the beginning of the end of central banks’ willingness and ability to impose calm. With continued uncertainty around Greece, the UK talking of an EU referendum, and the likely start of rate hikes in the USA and elsewhere, it looks to me as if volatility is back to stay. The other main driver of change in the FX market is the continuing aftereffects of ‘the investigation’. I’m not going to comment on the wrongdoing it discovered and the fines that were imposed, except to say that I understand the anger and frustration of the overwhelming majority of the market who did nothing wrong but saw their work undone by a tiny minority. To paraphrase Churchill: ‘Never was so much, made by so many, blown by so few’.

One of the most interesting developments in the industry is the elevated standing of investment manager, GSA Capital as it enters at number 34 in volume this year. The highest ranking non-bank provider.

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