Saxo Bank partners with Citi, in preparation for “July 15”

As July 15 approaches, US Forex firms and foreign banks continue to scramble for solutions.

Saxo Bank and Citigroup announced yesterday that Saxo Bank will service all US clients through CitiFX Pro. This announcement comes amid a flurry of other similar notices, as firms doing business in the US prepare for the next phase in the implementation of the Dodd-Frank Act on July 16 – although since Friday July 15 is the last “business day” before July 16, the rules are now commonly being referred to as the “July 15 rules”.

For Forex firms doing business from or in the US, the main two applicable Dodd-Frank rules are:
a) no more margined commodities trading, and
b) no more exceptions for foreign licensed banks to take US retail clients.

In response to a), we have seen a number of recent moves by Forex firms in the US to either totally remove Gold and Silver (and other commodities) from their trading menu for US clients (e.g. Gain Capital, FXDD), or continue to offer Gold and Silver trading but on an unleveraged basis, with 100% margin required (e.g. Oanda).

And with regards to b), most of the Forex firms organized legally as licensed banks have apparently simply withdrawn from the US market (e.g. the three main Swiss-based firms, MIG Bank, Swissquote and Dukascopy), and/or quietly sold their existing US clients to one of the US-based brokers.

We do not see Saxo Bank’s announcement as having much effect on them or on the US market as – despite being one of the largest Forex firms worldwide – Saxo Bank never did much marketing in the US, preferring to operate in the US until now via their White Label client, CitiFX Pro. What Saxo Bank’s new announcement means is that the (few) direct clients it does have in the US will be formally transferred to CitiFX Pro, which as a Saxo Bank white label offers the same basic technology platform to clients. Indeed, the Saxo-Citi partnership is already in our view the longest standing and most successful white label relationship in the business. Having the widest available array of tradeable products across the Forex and CFD spectrum, and offering the stability of being a licensed bank, Saxo Bank has been the most successful provider of Forex white label solutions to major financial institutions – other than Citi, Saxo Bank has recently signed up Barclays, Microsoft MSN and TD Ameritrade as new white label clients.

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