You’ve probably heard already: Deutsche Bank’s FX business is no longer the best in the business. It’s no longer even the second best in the business, or the third: it’s the fourth. And Barclays’ whose FX business used to be up there snapping at Deutsche’s heels is now only the sixth best – which doesn’t really count as the best at all.
Here’s the sad demise of Deutsche and Barclays’ FX trading businesses in one chart:
And, here it is in another, even more illuminating one:
Now, clearly it wasn’t supposed to be like this: the direction of travel was supposed to be the other way. So, what went wrong?
It’s tempting to blame juniorization: both Deutsche and Barclays cleared out senior traders after the FX trading scandal and Barclays in particular dumped a whole load of FX MDs in 2014. But then, Citi and UBS have been cutting FX traders too (eg, Citi’s ‘star FX trader’ Anil Prasad left in 2014) and they’re both doing totally fine and now rank 1st and 3rd respectively (J.P. Morgan’s second).
What’s behind the demise of Deutsche and Barclays then? Try a lack of commitment and under-investment in electronic trading systems. Try an over-emphasis on equities instead of areas of traditional strength. Try the fact that Zar Amrolia, the architect of Deutsche’s entire fixed income trading business is now running XTX Markets, a London based electronic FX trader, which suddenly turned up in position nine. Strangely enough, XTX contains plenty of former Deutsche people. – For example, CEO Alexander Gerko is a former Deutsche FX quant trader and head of quant trading research, head of sales Jeremy Smart spent nine years at Deutsche, and quant trader Alexander Migita spent three years at the German bank.
Most notably, XTX has hired some interesting development talent from the likes of Google. This is almost certainly easier to do when you’re an up-and-coming electronic trading business instead of a declining bank.