Big three banks share derivatives spoils

Citi was the bank of choice for corporate clients in FX swaps and forwards, while Deutsche Bank was voted top in these categories by investor clients. Both client sectors voted UBS first for vanilla and exotic FX options in the survey, which was based on the responses of more than 700 global clients.

FX derivatives was the most competitive section of the survey this year, which also assessed clients’ preferences in equity, credit and interest rate derivatives.

That may partly be due to huge changes to the customer base in forex in the past two years.

"The composition of end-users has evolved dramatically," said Richard Moore, head of global rates and currencies at Citigroup in London. "Banks who in the past were niche competitors are now end-users. There’s been an explosion of hedge funds trading foreign exchange. Proportionately, corporates account for much less of the market."

But the biggest battle for market share in derivatives is currently being played out across asset classes in euro-denominated derivatives.

Here, in interest rates and foreign exchange, as many as nine firms secured at least one first-place ranking: Barclays Capital, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Société Générale, Royal Bank of Scotland and UBS.

Despite consolidation in European banking, competitive pressures have increased over the past year, said bankers, partly due to a switch of focus from equity markets to fixed income, where most European banks are relatively strong. "Commercial banks in Europe have come back with a vengeance on the back of the growth in the structuring business, and have the capital to put to work. In the flow business, where there are lower barriers to entry, we’ve seen some silly prices being quoted to gain market share," said Michele Faissola, managing director and global head of rates at Deutsche Bank in London.

JP Morgan and Goldman Sachs are notable in the survey as investment banks challenging the hegemony of the ‘big three’ in FX derivatives.

Yusuf Aliredha, London-based co-head of European fixed-income sales and global head of foreign exchange sales at Goldman Sachs, which placed in the top three for investor clients in all four FX categories, pointed to the firm’s emphasis on structural flexibility and innovation to explain its success.

Barclays Capital is another bank that is improving its position across asset classes, moving into Risk’s top 10 derivatives houses for asset managers for the first time. Jerry del Missier, London-based global head of rates said: "In foreign exchange, we made a real commitment to rebuild our franchise, strengthening our options business, globalising the team and adding salespeople."

 

FX swaps

Corporates

% of votes

1

Citigroup

12.92

2

JP Morgan

7.14

3

Deutsche Bank

7.08

4

UBS

6.96

5

Royal Bank of Scotland

5.95

6

HSBC

5.89

7

ABN Amro

5.11

8

Goldman Sachs

4.29

9

Bank of America

3.63

10

Barclays Capital

3.57

 

Asset managers

% of votes

1

Deutsche Bank

12.33

2

Citigroup

11.14

3=

Goldman Sachs

10.75

3=

UBS

10.75

5

JP Morgan

7.99

6

Barclays Capital

5.13

7

Royal Bank of Scotland

4.93

8=

Dresdner K’wort W’stein

3.25

8=

Morgan Stanley

3.25

8=

State Street

3.25

 

FX forwards

Corporates

% of votes

1

Citigroup

10.99

2

Deutsche Bank

7.66

3

UBS

7.59

4

JP Morgan

7.19

5

Royal Bank of Scotland

6.06

6

Goldman Sachs

4.93

7

ABN Amro

4.79

8

HSBC

4.53

9

Bank of America

4.26

10

BNP Paribas

3.60

 

Asset managers

% of votes

1

Deutsche Bank

13.68

2

UBS

12.55

3

Goldman Sachs

12.12

4

Citigroup

10.19

5

JP Morgan

9.36

6

Royal Bank of Scotland

6.48

7

ABN Amro

3.70

8

Morgan Stanley

3.60

9=

Barclays Capital

2.88

9=

CSFB

2.88

 

FX options vanilla

Corporates

% of votes

1

UBS

12.75

2

JP Morgan

12.59

3

Citigroup

11.53

4

Deutsche Bank

8.35

5

Goldman Sachs

6.68

6

ABN Amro

6.53

7

HSBC

6.37

8

Bank of America

4.40

9

CSFB

3.79

10

Barclays Capital

2.58

 

Asset managers

% of votes

1

UBS

16.47

2

JP Morgan

11.46

3

Goldman Sachs

10.28

4

Citigroup

8.70

5

Deutsche Bank

6.19

6

ABN Amro

4.74

7

Barclays Capital

3.82

8

Merrill Lynch

3.16

9

HSBC

2.90

10

Société Générale

2.64


FX options exotic

Corporates

% of votes

1

UBS

16.30

2

JP Morgan

14.81

3

Citigroup

10.37

4

Deutsche Bank

9.63

5

Goldman Sachs

6.67

6

ABN Amro

5.93

7

Lehman Brothers

5.56

8

HSBC

4.07

9

Merrill Lynch

3.70

10

Barclays Capital

2.96

 

Asset managers

% of votes

1

UBS

23.66

2

JP Morgan

13.98

3

Goldman Sachs

13.71

4

Deutsche Bank

9.14

5

Citigroup

7.80

6

Société Générale

5.65

7

Barclays Capital

4.30

8

Merrill Lynch

3.76

9=

CSFB

2.42

9=

Bank Julius Baer

2.42

Methodology: 706 end-users completed Risk’s survey – 377 asset managers and 329 corporates. Respondents nominated their top-three dealers by instrument and currency in over-the-counter interest rate, foreign exchange, equity and credit derivatives. Participants were asked to base their votes on certain criteria, such as pricing, speed of transaction and liquidity provision. Nominated dealers were awarded three points for a first-choice vote, two points for a second-choice vote and one point for a third place. The categories listed here are derived from aggregating weighted votes in various currency pairs. The full survey appears in Risk magazine’s May issue.

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