We have discussed here a number of times how regional (commercial) banks have been ‘upping their game’, and investing in talented e-commerce people, better back-end pricing technology and importantly investing in new client facing single-dealer platforms (SDPs).
This investment enables the regional banks to better service their commercial clients and provide differentiated ‘workflow’ based solutions, that not only protects, but has been instrumental to them growing their client franchise, and gaining market share at the expense of the top global FX banks.
So, it’s interesting to see this theme is being picked up by FX Week, in an article today which talks about how commercial banks are set to dominate FX trading again.
The FX market is heading back to the 1990s as smaller, regional banks make a comeback and take back ground from investment banks
Full FXWeek article here (password required)
The chart below highlights this nicely, showing how the change in market share of lower ranked regional commercial banks has increased over the past five years at the expense of the global top five banks.
Source: EuroMoney FX Ranking showing change in market share of each group of banks (2008-13)
The confluence of regulatory pressures of Basle, Dodd Frank, Emir and Volcker Rules (when it kicks in) have resulted in many pulling back from capital-intensive principal based businesses and reducing their proprietary trading. As a result, the business case for regional banks investing in their client facing single-dealer platforms has actually never been stronger, and is delivering rewards to those who are investing, as their SDP allows them to:
- Attract and retain more clients
- Grow revenue per client
- Improve trading margins
- Control costs and make your sales desk more productive
- Bring new products to market fast
More on the benefits on an SDP available here