6. Is client-related trading growing or diminishing as a share of the business?
If prop trading volumes are up, client volumes are growing even faster, according to 77.78% of respondents. For many respondent banks, the increasing number of fund managers treating FX as an investment product, combined with targeted client acquisition strategies by the bank, has meant that a lot of firms have witnessed a substantial rise in client-related trading.
At BNP Paribas, Mr Foch says the bank’s client-related trading volumes have grown substantially with hedge funds and real money funds. “Our business… has exponentially increased due to a more aggressive coverage and pricing on the whole spectrum of products across geographies,” he says.
It is a similar story at Calyon. The bank has increased its market share with a particular client group. “Client volume is growing as more people are trading currencies as an asset class,” says Mr King. “In our specific case, we increased our client share as a result of improved client penetration in the fixed income sector.”
RBS says that it too has seen a rise in trading volumes from clients in the fixed income area, which are being attracted back to the FX business as more transparent pricing increases the liquidity. “Price discovery has brought a myriad of new clients to the markets [and] the growth of FX as an asset class has rekindled the interests of the fixed income community,” says Mr Haws.
Improving technology is also driving up volumes, Mr Haws says. “Technology accommodates high frequency, efficient trading. Client volumes are definitely on the increase, making operations areas a key resource.”
RBC’s Mr Henderson says that, as a percentage of the bank’s daily business, client volumes have grown steadily for the past few years. “FX was an area in which model builders found inefficiencies to exploit and the number of client-related trading platforms grew because all the funds were trying to find alpha-related gains,” he says. “There is a growing reliance on this business as banks derive views from the models driving the directional flows in the market. Therefore, as the flow is growing, so is the importance [to the business] as great insight from our customers can create opportunities for the banks and their trading platforms.”
