Big banks losing institutional FX clients

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Large FX clients moving to ECN trading and FX-specialist firms for analysis.

An interesting Reuters article summarizes how large institutional Forex clients -- such as pension funds, corporations and university endowment fund -- are looking beyond their traditional bank relationships for their Forex needs, and the banks are losing FX market share.

A number of lawsuits brought against banks such as BNY Mellon and State Street Bank have alleged that these banks massively overcharged their pension fund clients on Forex trading. Lawsuits or not, institutional Forex traders -- whether speculators or those looking to hedge or deal with "real" currency issues -- are looking for much better advice and pricing in their currency trading efforts.

On the one hand, large consumers of FX trading services are looking for better FX research and analysis, and are leaving banks to deal with specialist firms such as FX Transparency LLC, and Global Trading Analytics LLC. And in execution, institutional Forex traders are establishing direct relationships with Forex ECNs such as ICAP EBS, Hotspot FX and FXall (or indirect via Prime Brokers), or are trading with retail FX firms offering ECN-like pricing and access.

This trend can be seen in the numbers reported by FXCM and Gain Capital ( for their growing institutional businesses, at the same time that retail FX volumes have been somewhat stagnant. For example, institutional FX volumes at FXCM and Gain Capital (, two of the largest US-based retail FX firms, have risen by several multiples over the past two years:

FXCM mo instit volGain mo instit vol

For more on the global Forex industry see the LeapRate Dow Jones Forex Industry Report.

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Guest Wednesday, 23 April 2014

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