World's Best Foreign Exchange Banks 2008
Platt, Gordon, Global Finance
Global Finance selects the leaders in the world's biggest financial market.
The 54 central banks and monetary authorities that took a measure of the foreign exchange market last year under the auspices of the Bank for International Settlements discovered an unprecedented rise in activity. Average daily turnover totaled $3.2 trillion, an increase of 71% at current exchange rates from the previous global survey done three years earlier.
A significant increase in the foreign exchange activity of hedge funds was one reason for the surge, as the search for alpha, or excess returns, led them to the FX market. Trading foreign currencies as an asset class became popular in part because the market moves up and down independently of smaller markets, such as stocks and bonds.
Of course, the search for higher returns in overseas stock markets by investors of all descriptions also contributed to the rise in FX trading and hedging of positions. A third major factor in the rise of turnover in traditional foreign exchange markets was an increase in the level of algorithmic trading by high-speed computers.
Trading between large banks, either for themselves or their customers, accounts for more than half of the trading in the FX market. The best foreign exchange banks are those institutions that provide fast, reliable and cost-effective services to global businesses and investors, as well as advice and innovative products to meet the specific needs of their increasingly diverse range of customers.
Global Finance selected Deutsche Bank as the global winner. We also chose the leading foreign exchange banks in 82 countries and regions, as well as the best online trading systems, both bank-owned and independent, and the best bank for foreign exchange research, as well as separate awards for fundamental research, technical research, currency forecasts and strategy and hedging.
With input from industry analysts, corporate executives and technology experts, Global Finance selected the winners based on objective and subjective factors. Our criteria included transaction volume, market share, global coverage, customer service, competitive pricing and innovative products and technology.
Deutsche Bank is the world's largest provider of liquidity to the foreign exchange markets.The bank is a major market maker in foreign exchange swaps, and it handled record volumes efficiently during the turbulent financial markets of the second half of 2007.
Not only is the bank the biggest in terms of spot foreign exchange trading, but it also is the most innovative in developing currency risk-management techniques using derivative products. Deutsche Bank offers cash flow and balance-sheet foreign exchange hedging for corporations. It also offers deal-contingent forwards for cross-border mergers and acquisitions. Deutsche Bank was the first bank to develop target-profit forwards, or TPFs, which enable clients to terminate hedging once a predetermined profit has been attained.
Meanwhile, global investors are showing increased interest in the bank's currency asset products. Deutsche Bank recently implemented live streaming prices for foreign exchange indexes, non-deliverable forwards, currency baskets, precious metals and currency exchange-traded funds.
The bank is a leader in foreign exchange prime brokerage. Its FXSelect platform offers actively managed currency alpha products. Investors may chose from more than 70 currency managers with investment styles that range from totally discretionary to systematic. Notional investment in Deutsche Bank's currency indexes tripled last year to about $6 billion.
Citi, the largest US bank by assets, is the leading foreign exchange bank in North America. Its currency business is growing faster than the general market. The bank's currency options volume, in particular, has increased strongly in the past year. …