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Citi plans to withdraw from two-thirds of foreign exchange platforms

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Via Financial Times

One of the biggest banks in the currencies market is learning to say no to customers.

Citi, the third biggest dealer in the $6.6tn-a-day foreign-exchange market, plans to whittle down the number of websites and systems on which it competes with other banks on prices to win business from clients.

The bank plans to reduce the number of systems it uses to connect with customers by two-thirds by the first quarter of next year, people familiar with the matter told the Financial Times. This could save the bank millions of dollars a year in costs.

The move also suggests that after two decades during which competing banks have leapt at almost any chance to join third-party systems in response to customer behaviour, they now want to wrest back more control. One person familiar with the matter said there is a feeling that banks are paying the bills to provide a “free option” for clients.

Citi is seeking to cut the total number of supported platforms from 45 to 15 by the first quarter of 2020. It has sent a survey to all those providers, seen by the FT, which scores each one on the breadth of products they offer, the fees they charge and transparency on processes, as well as other metrics.

All big banks invest heavily in their own systems for churning out currency prices to clients but many of those customers prefer to line up various banks’ prices in one place, especially since Europe-wide Mifid II rules have forced them to show they have sought the best price available for each deal.

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So-called multibank systems such as FXall and 360T have flourished to meet that need, catering to different types of customer and imposing a good deal of discretion over how prices are processed and executed.

Some of these systems are popular with clients and have become an established feature of how currencies change hands each day. Others, Citi thinks, are less worth the effort and expense. A spokesperson for the bank declined to comment.

One person familiar with the matter said that Citi could save $5m-$10m a year by shortening the list of venues on which it is willing to trade.

Citi is the first big bank to turn the tables on vendors and become more selective in its approach, at the risk of alienating some clients. But other rivals also gripe privately about the plethora of platforms and their associated costs.

“In the grand scheme of things, the smaller platforms add very little value but a lot of cost, effort and energy goes into maintaining a presence on them,” one person familiar with Citi’s efforts said.

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