In an unexpected announcement, Citigroup has made it clear that they were scaling down on third-party forex trading platforms. The sudden reduction in ambitions has cost thirty forex platforms the major banking firm’s support. Of the 45 third party platforms Citi caters to, only 15 will be left in 2020’s first quarter.
A Smart Downscale
The Financial Times referenced to sources with knowledge of the matter in their report. According to the source, Citi expects to save between $5 million and $10 million in costs per with this downscale. The Wall Street banking firm sent surveys to every forex platform that allows traders to select what bank they want to trade currencies with. Citi managed to identify the fees, the products, and other relevant metrics from this survey and chose to scale down because of it.
While the concept of a trading platform that allows users a choice between multiple banks have revolutionized the forex industry, it’s not all sunshine and rainbows. A source familiar with Citi’s workings told the Financial Times that there is very much a number-crunch when it comes to expanding to a new platform.
A Sad Truth
They explained that the smaller forex trading platforms typically don’t bring a lot of value to the table. The problem is compounded with a large number of administrative costs that follow incorporating Citigroup’s banking option to any platform, large or small. The banks that are footing these bills tend to get the impression they were only providing a free option for the clients on the various small exchanges.
Citi has already established itself in the Forex market. Last year, it was the fifth-largest firm by the market value of firms that trade in currency. They’re only beaten by giants like UBS and JPMorgan.
The World Keeps Moving
As Citi scales down in the short term, it’s important to remember that major exchanges and banking giants have started to align themselves to take greater advantage of a market that moves $6 trillion around in a single day.
FXall, an electronic Forex trading platform used by corporations and asset managers, was a prospective candidate for acquisition for Deutsche Börse. The German exchange has made its motives for further expansion abundantly clear. Deutsche Börse’s last foray was into FX ECN almost three years ago through acquiring 360T.
Citigroup hasn’t been sitting idly by until now. They have made sweeping changes to properly conduct a review of the entire enterprise following a string of consumer scandals. The banking firm’s prime FX brokerage unit has had a tough time after they were forced to deal with as much as $180 million in losses through loans to an Asian hedge fund. The unit actually managed to get itself pulled from the currency trading division and subsequently put under the management of the prime finance and securities services unit of the lender in question.