Foreign Exchange Awards 2018 | Financial Institutions

The foreign exchange (FX) market is becoming more competitive. Machines are replacing humans at a rapidly growing rate. The top five FX banks are refining their client lists and avoiding markets offering low return on equity, thus giving up market share. The top five FX banks still account for 44% of the global market, according to the 2017 survey of FX users worldwide by Greenwich Associates; but that’s down from 53% in 2013. That has opened opportunities for regional banks with local expertise to step in as valuable partners.

“The bottom line is that the FX market is increasingly competitive,” says Kevin McPartland, head of market structure and technology research at Greenwich Associates, “and competition is always good for the market.”

Maybe. Hypercompetitive markets can drive an easing of ethical commitment. That’s not happening in FX. The world’s top FX banks have checked and rechecked their operations carefully to make sure they are complying with the spirit of the industry’s new global code of conduct.

Central banks and market participants from 16 countries and territories around the world collaborated in developing the FX Global Code, a set of global principles “to promote a robust, fair, liquid, open and appropriately transparent market.”

Participants are expected to behave in an ethical and professional manner to promote the fairness and integrity of the market. They must be aware of, and comply with, the laws, rules and regulations applicable to them and the FX market for each jurisdiction in which they do business. The code has no enforcement mechanism, however.

Technology has helped maintain a balance. FX investors continue to increase their trading on multidealer platforms, which create a more level playing field for liquidity providers. “The FX market is now one of the least concentrated over-the-counter markets in the world,” McPartland says. “Financial end users, regulators and emerging dealers all benefit from its growing diversity.”

In this, our 18th annual World’s Best Foreign Exchange Providers Awards, we selected winners in 104 countries and seven global regions. For the first time, we name the Best Banks for FX Trading Technology. We feature four global awards, including Best Global FX Bank.

GlOBAL WINNERS

BEST GLOBAL FOREIGN EXCHANGE BANK

Citi

Citi trades more than 140 currencies from FX desks in 83 countries and has the broadest range of clients of any FX bank. Citi is one of the main global banks serving large multinational corporations. The CitiFX Pulse platform enables corporations to track cash flow and balance-sheet exposure throughout their worldwide subsidiaries. It includes pretrade market information, including news, research and risk-management tools. Citi’s in-house systems help manage the documentation required for FX transactions in many emerging markets. The CitiFX Pulse platform provides local expertise that extends through the post-trade settlement process.

BEST FX PROVIDER FOR CORPORATES

Société Générale

Société Générale’s corporate and investment banking group (SG CIB) has created a cross-asset platform, One Corp, which leverages its capabilities to provide practical solutions that improve the management of FX and commodity risks for corporations. SG CIB has developed market-leading, structured FX solutions, using its Cash FX, currency derivatives and index expertise. The One Corp platform analyzes and designs corporate solutions benchmarked against key competitors.

BEST FX PROVIDER FOR EMERGING MARKETS CURRENCIES

Standard Chartered Bank

Standard Chartered is a leader in emerging market, illiquid and restricted currencies. The bank actively trades more than 100 currencies and has FX experts positioned in 39 countries. Standard Chartered leads in the introduction of onshore and offshore FX option products in Asia, Africa and the Middle East. It is also active in the emerging markets of Latin America and Eastern Europe. Standard Chartered is a leading provider of financial risk-management tools, including products to effectively manage currency exposure.

BEST LIQUIDITY PROVIDER

UBS

With offices in 54 countries, UBS has global reach, innovative technology and expertise in FX derivatives. The Swiss bank is a leader in market-making and execution services in the FX and precious-metals markets, which are available through the UBS Neo platform. The bank’s prime brokerage and clearing service offers straight-through processing and gives clients immediate access to their positions, reports and market-risk data. Clients are able to trade up to 550 cross-currency pairs.

REGIONAL WINNERS

NORTH AMERICA

J.P.Morgan

J.P.Morgan has moved up the ranks of FX banks through heavy investment in technology to improve the customer experience. The bank now has the biggest market share among FX dealers, according to the 2017 global survey of currency users by Greenwich Associates. More than 80% of J.P.Morgan’s foreign-exchange trading is conducted electronically. Using the bank’s eXecute system, a trader made a $100 million FX trade last year on a mobile phone.

LATIN AMERICA

BBVA

BBVA is a leading FX bank in Spain and in Latin America, where it has trading desks in Mexico, Colombia, Peru, Chile and Argentina. BBVA is the leading bank in trading the euro against the Mexican peso. The bank recently launched a mobile money-transfer business with a new app called Tuyyo. Tuyyo is initially focusing on remittances from the US to Latin America and the Caribbean.

WESTERN EUROPE

HSBC

HSBC has become a favorite FX bank for corporations across Europe, thanks in part to its global reach and technology. The bank’s Evolve platform provides customizable user tools with a wide range of optional features. Evolve serves over 6,000 clients in more than 35 countries, with access to over 1,500 currency pairs. It offers corporate treasurers a single view of FX exposures and hedges across their business. The self-service trading platform supports FX spot trades, forwards, swaps, nondeliverable forwards, algorithmic trading and precious metals.

CENTRAL & EASTERN EUROPE

Société Générale

Société Générale operates in 14 CEE countries, including Russia (where it owns Rosbank), Poland, the Czech Republic and Romania. Altogether, the bank maintains a network of more than 2,500 branches in the region. SG offers customized solutions to address unusual risk-management issues, including mergers & acquisitions and balance-sheet hedging. In Romania, it successfully acted as sole hedge provider for the contingent FX hedging of supermarket chain Profi’s acquisition by Mid Europa.

MIDDLE EAST

National Bank of Kuwait

National Bank of Kuwait, one of the leading banks in the Middle East, deals in more than 90 currencies. The bank is equipped with state-of-the-art FX platforms and interfaces from leading global providers. NBK has the largest FX turnover in Kuwait and is the leading market maker and liquidity provider for the Kuwaiti dinar and the other Gulf Cooperation Council currencies in the Kuwait market. NBK has a global market presence, with offices in Geneva, London, New York, Paris and Singapore.

AFRICA

Standard Bank

Standard Bank of South Africa has a presence in 20 countries in Africa and is the leading liquidity provider for African currencies. Standard Bank, also trading as Stanbic Bank, executes more than 30% of Africa’s foreign-exchange volume. It is a market maker in most of Africa’s 54 currencies. The bank also has a strong presence in the offshore market, where it actively deals with large institutions and corporate accounts. Standard Bank is the first African bank to offer a single global FX platform with streaming prices.

ASIA-PACIFIC

DBS Bank

With new distribution channels coming online and access to new client segments such as hedge funds, DBS Bank increased its interbank market-making turnover for spot currencies by 40.5% in the first half of 2017. The bank is a major interbank market participant in China and other key Asian markets, including South Korea, Taiwan, India and Indonesia. The bank strengthened its position in India by offering bespoke risk-management strategies. It also has been a market maker in India’s FX swap markets for more than a decade. DBS’s DealOnline platform offers more than 40 currency pairings in spot trades, forwards, swaps and Asian nondeliverable forwards.

BEST FOREIGN EXCHANGE RESEARCH & ANALYSIS

FX RESEARCH

BNY Mellon

As the world’s largest custodian, with $32.2 trillion of assets under custody and administration, BNY Mellon has unique insight into cross-border investment flows. It provides investment-management services in 35 countries and more than 100 markets. BNY Mellon is a major global foreign-exchange provider and FX dealer offering support in all currencies, with a focus on emerging markets. The bank offers direct dealing via its FX Desk and ecommerce platforms. It also provides automated execution services through its Custody FX and alternative FX pricing options.

FUNDAMENTAL ANALYSIS

Deutsche Bank

As one of the world’s top FX trading banks, Deutsche Bank is closely followed for its views on the market. Currency performance in 2017 was all about regional diversification and local stories, the bank’s macro strategist Oliver Harvey says in a recent report. The rebound in eurozone growth helped European FX outperform. The currencies of Turkey and South Africa suffered from poor local news flow, he says. A less interconnected world should mean lower correlations between markets, more sensitivity to local monetary policy and less scope for financial and economic spillovers, he adds.

TECHNICAL ANALYSIS

BNY Mellon

BNY Mellon’s iFlow iQ analyzes flow data and creates trading signals in various asset classes, including foreign exchange. The model captures data when trades are placed, making it more timely than those based on settlement data. BNY Mellon’s model focuses on global capital flows to help generate absolute returns, or alpha. Clients can study the daily data and gain insights into cross-border investment activity.

FORECASTS

BBVA

Spanish bank BBVA is one of the top foreign-exchange banks in Latin America and has compiled a record for forecasting accuracy. It remains bullish on the currencies of Brazil and Mexico, noting that they have benchmark interest rates about five times higher than that of the US. BBVA owns a controlling stake in Turkey’s Garanti Bank and is generally upbeat on emerging markets. It also expects fundamentals to continue to support the euro.

BEST BANK PLATFORM (OVERALL)

J.P.Morgan eXecute

A growing number of FX and commodities traders are relying on J.P.Morgan’s eXecute trading app to take care of business while they are away from the desk. Traders can track desktop orders from an Android device and can scan prices without logging in. Options are available on 90 currency pairs. The platform is available on desktop, Web, API and mobile.

MOST INNOVATIVE BANK PLATFORM

Shinhan Bank’s FX Hedge L/C

Because trade is so important to South Korea, Shinhan Bank strives to continuously improve procedures and lower costs in its foreign exchange business. By combining a letter of credit with an FX forward contract, Shinhan FX Hedge L/C provides importers with competitive acceptance commissions and discount charges. This enables the bank’s clients to hedge any exchange risk that could occur at the point of settlement.

BEST PLATFORM FOR CORPORATIONS

CitiFX Pulse

Citi’s online FX hedging platform, CitiFX Pulse, enables multinational corporations to track cash flow and balance-sheet exposure to currency fluctuations, with associated hedges, across subsidiaries and multiple markets. Citi also helps corporations assess and quantify financial risks from FX exposure before implementing hedges. CitiFX Pulse provides access to 700 currency pairs.

BEST EXECUTION ALGORITHMS

Northern Trust’s FX Algo Suite

Northern Trust introduced a suite of FX execution algorithms for clients in June 2017 that provides clients greater transparency and control of FX exposure. Pricing is aggregated from up to 15 different liquidity pools, and the execution algorithm helps clients reduce market impact on large orders while offering a systematic process to offset FX risk.

BEST TRANSACTION COST ANALYSIS

Bank of America Merrill Lynch

Currency trades are increasingly subject to transaction cost analysis (TCA) as part of efforts to ensure best execution. Bank of America Merrill Lynch offers a technology suite that can monitor the cost of executing individual trades and provide aggregated data to suggest optimal trading strategies, particularly when using algorithms. According to Greenwich Associates, the use of FX algorithms will steadily increase over the next three to five years due to regulatory requirements such as the EU’s revised markets in financial instruments directive (MiFID II).

BEST BIG-PICTURE VIEW OF POSITIONS

Citi Velocity’s Command Centre

City Velocity’s liquidity and spread heatmaps display a high-level overview of the market. The Command Centre has been upgraded to include activity and audit-trail reports and “red-flag activity” alerts. Mobile access control has also been extended to Android devices. Citi developed a new user interface to give administrators at its client companies visibility and control over their traders’ access rights and activity on the system.

BEST END-TO-END PROCESSING

Deutsche Bank’s Maestro

Deutsche Bank’s workflow program, Maestro on Autobahn, helps streamline and automate FX workflows, in part by automating share-class hedging, portfolio hedging, FX funding flows and systematic FX spot transactions. Maestro can help automate any tedious work process that can be described as any series of logic-based steps.