HSBC enters retail FX business

Banking giant HSBC has become the latest major financial institution to enter the retail FX business, announcing a White Label agreement with Oanda. This is a significant win for Oanda, which has seen other recent large White Label clients go primarily to either FXCM (E*Trade) or Saxo Bank (Barclays, TD Waterhouse).

Forex White Label relationships are tough ones, that don’t always work out. Most notably, Deutsche Bank’s dbFX, which operated as a White Label of FXCM, did not go well and eventually the business (i.e. the client list) was sold to Gain Capital for not very much money. Microsoft’s attempt at entering the business — and taking advantage of the 1 million + daily visitors to its MSN finance portal — via a White Label agreement with Saxo Bank lasted just one year before disbanding. And CitiFXPro, Citigroup’s entrant via a White Label with Saxo, which is focused mainly on the US market, has just 634 US clients, versus for example 23,000 + for Oanda, 19,000 + for FXCM…

The HSBC-Oanda hookup is potentially interesting mainly because of one word — China. Trading volumes coming from retail FX clients in China have been rapidly rising recently, and HSBC is a major player in Chinese finance. For example, HSBC recently launched the first international renminbi bond to be completed outside Chinese sovereign territory. The potential for HSBC to become a major player in Chinese retail FX is certainly there, if it focuses its resources in that direction.

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

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