Citi and Goldman Break Into Retail FX
June 2, 2008 by Trader Rich
Citi has been in the retail FX market for a couple of months now but it signals a continuing trend of big financial institutions trying to get a piece of our forex action. Deutsche Bank was the first big bank to get in a couple of years ago (from what I remember) but it’s interesting to note that all these big banks did was partner with the bigger forex firms. They blew up the sub-prime mortgage business, will they do the same to Forex?
Here are the notable partnerships between big banks and forex specific firms:
Deutsche Bank is partnered with FXCM.
ABN Amro and UBS are partnered with Oanda.
Citi is partnered with Saxo Bank.
Goldman is partnered with CMC Markets.
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Isn\’t there a relationship between FXCM & Lehman too?
I actually think the development of the big banks coming to Forex is a good thing. They delayed their entry for years because of the \”reputational risk\” that exists when average joe trader does not like a fill or Trusting Joe lets Shady Jim blow , I mean manage his Forex account, and post nasty things about the dealer.
The good thing is that their entry makes Forex chic to a HUGE number of people who did not know about forex or who were sitting on the fence. Their marketing budgets are much deeper than that of the large FCMs. With more traders coming on board, the clout of retail trading will just get much bigger than the 10% of the daily turnover that we currently represent.
I think a thing or two should be said about the \”smart money\” that is already part of the system. The logic is: smart money -> more operational sophistication -> more safety for investors. Of course, money alone will not be sufficient to make Forex free of Refco-like implosions, but it will make it less likely. Several very well funded private equity firms are equity partners of multiple Forex dealers:
Gain Capital: 3i, VantagePoint, Tudor Ventures, Edison Venture Fund, Cross Atlantic Capital Partners, and Blue Rock Capital
FX Solutions: Francisco Partners
Interbank FX: Spectrum Capital
Oanda, GFT, the list goes on. . . most FCM with $10m or more in adjusted net capital today have private equity money helping them to compete with the likes of DB and Citi. I think it makes it very interesting for all of us going forward.
was there supposed to be a deal between goldman and gaincapital? what was the progress with that?
anyone knows?