Top banks dominate research rankings

The US bank moved up from fourth place last year to top the category ahead of last year's winner UBS. Citigroup, ABN Amro and Merrill Lynch also made the top five, while Deutsche Bank did well, coming top among corporate voters and second as voted for by investors.

JP Morgan improved its offering by going for a more thematic approach to research, said John Normand, foreign exchange and global fixed income strategist in London. "We cut out our weekly publication and scaled back our quarterly report so that we can focus on putting out information that customers find useful when something relevant has happened." He added that the bank is aiming to integrate FX research across products so that there is more consistency between asset classes.

Tony Norfield, ABN Amro's global head of FX strategy said this year has shown the importance of having quality research. "The major currencies have been caught in an erratic phase but one which has seen a lot of range trading. The models that worked in 2003 did not work in 2004 so we saw a lot of investors lose money. This has put a premium on in-depth analysis."

Bilal Hafeez, global head of strategy at Deutsche Bank, concurred that the range-bound nature of the market over the last year has made the approach that banks take to research key. He said: "We have seen increased demand for research and we have developed new ways of looking at the market to fit in with changed market conditions."

He pointed to the bank's research on the impact of the option market on spot trading. He said: "With options making up a much more significant part of the market it is having an increasing impact on how spot rates behave. Being such a large player in the options market has helped us understand how these dynamics affect rates in terms of the volatility of spot rates."

Norfield pointed to the Bank for International Settlements triennial survey of the FX markets that reported a 57% jump in average daily turnover in FX for the three years to April 2004. He said: "People are looking much more on FX as an asset class and so a greater proportion of money is being traded actively. In addition pricing has become much less of a factor with spreads having fallen due to more efficient trading through online platforms which means that value of what is provided in terms of analysis becomes much more important."

ABN Amro expanded its research team last year and has particularly focused on emerging markets as the major currencies have not been fertile ground for making large trading gains this year, said Norfield.

Hafeez noted the majority of the increase in demand for research and analysis came from more sophisticated investors such as hedge funds. "These investors need to have a more dynamic view on what currencies are likely to do and so need more sophisticated research." Norfield also pointed to the increase in clients who need analysis that goes beyond the headlines. He said: "Hedge fund and real money managers need research that goes beyond the headlines and gives a more detailed picture of the dynamics behind what's going on."

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