Citigroup tops options

Citi stormed up the rankings in all three client segments, receiving most votes from corporates and investors, while coming second in the bank category. The increased support from the banking community, which ranked it fifth last year, reflects a change in strategy for Citigroup, said Steve Reiter, global head of FX options in London.

At the beginning of the year, the bank began an earnest push to serve the non-market making banks as clients. "Citibank used to leave the non-market making banks to the broker community, but now we cover them as clients and it's having a great impact," said Reiter.

Central to this effort was the launch of its online FX options platform, CitiFX Options Online, in January. The platform is being used by clients for price discovery as well as trading. "That transparency adds a lot of value, particularly to the bank segment. But you have got to have great pricing and liquidity, and then if you can deliver that on a state-of-the-art tool, that's a great combination," he added.

Certainly, the growth of online trading in the FX options market has brought about greater transparency making it more viable for non market-making banks to tap market-making banks for liquidity in order to provide their customers with products.

"There is so much more transparency in the FX options market this year versus several years ago that institutions are comfortable concentrating their trading with the major market makers, so that they themselves can focus on providing service to their clients," said Reiter.

Perhaps as a consequence, he believes that there is more consolidation taking place in the options market than in spot. "It's relatively simple for any bank or market maker to access the spot market for liquidity. But the options market requires deep penetration and large books to be able to support the tight bid/offer spreads that are demanded by customers," he said.