Our report series covering spot FX and FX derivatives is growing to include the largest multi-dealer platforms and banks. See topics covered below and a report lists here.
Historical growth in spot FX and FX derivatives evaluated against that of top-5 bank peers
Historical trading revenue attributed to interest rates, foreign exchange, equities, and commodities - consistent methodology across banks evaluated
Comparison of revenue run rate for FX holdings relative closest peers
Historical changes in interest rates futures contracts notional relative to OTC IR swaps and forwards by bank and close peers
Historical market share analysis by spot FX, outright forwards, FX swaps, and OTC FX options measured against top-10 U.S. peers and global FX benchmark
Forex Datasource estimates of banks' spot FX, forwards, FX swaps, currency swaps, and OTC FX options holdings by currency and other characteristics (e.g., counterparty type, net bought/sold options, average daily volume)
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Citigroup Inc. has been a foreign exchange (FX) powerhouse for decades and owns the largest FX derivatives portfolio globally. The 1999 Glass Steagall Act repeal allowed commercial banks to participate in investment banking and capital markets, but Citi’s FX holdings held steady at US$1.7 trillion and focused on spot FX and outright forwards. From 2002, however, a three-way competition with JPMorgan and Bank of America led all three banks to boost their FX derivatives in size and diversity, with Citi’s book ballooning to US$15.1 trillion as of Jun 2019 across multiple FX products. Were Citi’s FX derivatives holdings a country’s GDP, it would rank as the fourth largest, behind China, the United States, and the European Union.
This report touches on the rise of Citi’s FX derivatives portfolio within the context of its closest peers and the industry’s evolving FX product mix. We also examine its fixed income, currency, commodities, and equities (FICC+E) trading revenue growth and earnings fluctuations relative to its derivatives holdings.
As a bank grows its FX book of business beyond say US$1 trillion in FX derivatives, the market characteristics collected during Bank for International Settlements (BIS) and central bank FX surveys become increasingly descriptive of that bank’s FX operations as well. To model more granular aspects of Citi’s FX book of business, we drew inspiration from BIS Triennial FX surveys, and semi-annual BIS over-the-counter (OTC) derivatives surveys and central bank FX surveys. Per our analysis, U.S.-headquartered banks hold as much as 53% of global FX derivatives and Citi is the largest by several measures among the top-5 U.S. banks.
Select questions answered in this study include:
· How does this firm’s FX derivatives growth compare to similar-sized peers?
· What can be inferred from Citi’s timing and magnitude of these changes in FX derivatives holdings?
· How has this firm’s market share changed over time for spot FX, outright forwards, FX swaps, and OTC FX options?