Citi Scales Back Its Participation on Multi-Bank FX Platforms - Finance Magnates

Posted: 30 Oct 2019 10:36 AM PDT

Citigroup is suddenly reducing its global ambitions as a major FX trading powerhouse, cutting the number of third-party platforms it gives currency quotes to 15 from 45 by the first quarter of 2020.

The Financial Times today reported, citing people with knowledge of the matter, the Wall Street bank expects the scale back to save $5 million to $10 million in costs a year. Citi has sent surveys to all forex platforms, which allows currency traders to pick and choose which banks they trade currencies with, asking them to identify their products, the fees, as well as other metrics.

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Multi-bank, multi-user platforms have revolutionized foreign exchange trading over the past decade but a person familiar with Citi's efforts told the newspaper that "in the grand scheme of things, the smaller platforms add very little value but a lot of cost, effort and energy goes into maintaining a presence on them. There is a feeling that banks are paying the bills to provide a "free option" for clients."

Citi is the fifth-largest currency trading firm by market share last year, after the likes of JPMorgan and UBS.

Citi expands FX offering into Asia

From another perspective, however, other banking giants and major exchange groups have opted to position themselves to take an expanded role in the 6-trillion a day foreign exchange market.

Deutsche Börse, for example, was mulling the acquisition of Thomson Reuters' FXall, an electronic FX trading platform to corporations and asset managers. The move marked the German exchange's continued expansion motive in the foreign exchange space. It comes after nearly three years of Deutsche Borse's foray into FX ECN of its own with the acquisition of 360T, which turned to be the center of the exchange's global FX business.

Citigroup has made changes as it conducts an enterprise-wide review in the wake of a series of consumer scandals. Citi's FX prime brokerage unit has come under fire after staring down losses of as much as $180 million on loans to an Asian hedge fund. The unit was reportedly pulled from the currency trading division and put instead under the oversight of the lender's prime finance and securities services unit.

Elsewhere, the US bank has joined UBS AG to launch an electronic currency trading and pricing platform in Singapore, Asia's biggest foreign exchange hub. The new facility, which is slated to go live by the end of 2019, will support 23 spot currencies, including all those in the G10 group.

Singapore is the fourth forex trading engine location for Citi, which also has systems set up in Tokyo, New York, and London.

Citigroup Scales Down on FX Platforms Due To Excessive Costs - FXDailyReport.com

Posted: 31 Oct 2019 12:19 AM PDT

In an unexpected announcement, Citigroup has made it clear that they were scaling down on third-party forex trading platforms. The sudden reduction in ambitions has cost thirty forex platforms the major banking firm's support. Of the 45 third party platforms Citi caters to, only 15 will be left in 2020's first quarter.

A Smart Downscale

The Financial Times referenced to sources with knowledge of the matter in their report. According to the source, Citi expects to save between $5 million and $10 million in costs per with this downscale. The Wall Street banking firm sent surveys to every forex platform that allows traders to select what bank they want to trade currencies with. Citi managed to identify the fees, the products, and other relevant metrics from this survey and chose to scale down because of it.

While the concept of a trading platform that allows users a choice between multiple banks have revolutionized the forex industry, it's not all sunshine and rainbows. A source familiar with Citi's workings told the Financial Times that there is very much a number-crunch when it comes to expanding to a new platform.

A Sad Truth

They explained that the smaller forex trading platforms typically don't bring a lot of value to the table. The problem is compounded with a large number of administrative costs that follow incorporating Citigroup's banking option to any platform, large or small. The banks that are footing these bills tend to get the impression they were only providing a free option for the clients on the various small exchanges.

Citi has already established itself in the Forex market. Last year, it was the fifth-largest firm by the market value of firms that trade in currency. They're only beaten by giants like UBS and JPMorgan.

The World Keeps Moving

As Citi scales down in the short term, it's important to remember that major exchanges and banking giants have started to align themselves to take greater advantage of a market that moves $6 trillion around in a single day.

FXall, an electronic Forex trading platform used by corporations and asset managers, was a prospective candidate for acquisition for Deutsche Börse. The German exchange has made its motives for further expansion abundantly clear. Deutsche Börse's last foray was into FX ECN almost three years ago through acquiring 360T.

Citigroup hasn't been sitting idly by until now. They have made sweeping changes to properly conduct a review of the entire enterprise following a string of consumer scandals. The banking firm's prime FX brokerage unit has had a tough time after they were forced to deal with as much as $180 million in losses through loans to an Asian hedge fund. The unit actually managed to get itself pulled from the currency trading division and subsequently put under the management of the prime finance and securities services unit of the lender in question.

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