The five largest foreign-exchange dealers by market share handled more than half of all FX trades in 2013, and more volume will head to those dealers in the future, said a Greenwich Associates report issued Thursday.
The five largest dealers by market share — Deutsche Bank AG, UBS AG, Citigroup Inc., Barclays PLC and J.P. Morgan Chase & Co. — had about 53% of global trading volume last year, Greenwich said in the report. That’s up from 48% in 2012 and 45% in 2011.
The main trends driving business to the largest dealers — growth in electronic trading, increases in capital costs and growth in incentives to clear — should continue, meaning further concentration of FX trading among the top five in the next six months to a year, said Kevin McPartland, principal and head of market structure research at Greenwich.
“It’s an expensive proposition to keep up technologically, to build up these systems,” Mr. McPartland said in an interview. “Concentration is more extreme in foreign exchange than in other asset classes. The overarching reason is that smaller dealers have (fewer) resources, and platinum clients who do a lot of FX trading want platinum services, so they send that business to the few that can provide that.”
The full report is on Greenwich’s website.
