Citigroup, Deutsche Bank and UBS Warburg dominate FX derivatives in FX Week awards

Citigroup, Deutsche Bank and UBS Warburg led the FX forwards and FX options categories in FX Week’s awards again this year, confirming their dominance in derivatives.

UBS retained its top ranking in FX options overall with high regard from both its peers and institutional investors, in a year of high activity, the bank said. "In the first quarter of the year the options business was fairly slow and subdued," said John Meyer, global head of FX options at UBS Warburg in Stamford, Connecticut. "As soon as the dollar started going down you saw a pick-up in everything; the market was looking for a change and it got one." As a European bank, UBS naturally has more European customers, especially corporates, who need to hedge the falling dollar as their domestic currencies go up, he added.

The rise is supported by the latest Bank for International Settlements’ biannual survey of over-the-counter derivatives, released at the beginning of this month (FX Week, November 11). It showed that the notional value of FX options contracts during the first six months of 2002 surged by 39% compared with the same period last year. It also pointed to a rise in volatility - particularly in euro/dollar - as a key driver of the trend.

Dollar weakness and the bursting of the equities bubble have similarly driven an increase in speculative business, said bank officials. "We see that continuing," said UBS’s Meyer. "As equities wallow in a sideways market you will see more people dedicate money to FX as an asset class -- people will look towards options and structured FX products for directional plays and yield enhancement."

ANZ Investment Bank also rates a mention for its strong performance in derivatives this year. Its increased focus on developing a specialised sales force and trading team to work across asset classes has paid off with corporate voters, who rated the Australian bank highly in the FX options category.

Royal Bank of Scotland and HSBC have also made impressive inroads. RBS proved its strength in interbank derivatives dealing, achieving a second-place nomination from its peers. "At the same time as the FX options market continues to see fewer large players, FX derivatives continue to be a growth product," said Peter Rading, head of FX options at RBS in London. "Therefore there is still strong demand for FX option products in the market from secondary players." RBS has 30 traders, 10 structurers and 25 dedicated IT and quant research staff globally, he added. "Early this year we decided to leverage these resources and establish desks around the world to specifically offer client banks RBS’s FX options products."

Meanwhile, Citigroup and Deutsche Bank both gained ground to overtake last year’s winner of the FX forwards award, UBS Warburg. Citigroup moved up to top place in the category, achieving the highest nominations from both sectors of the buyside.

Officials also point to e-commerce as a continued influence on the take-up of FX derivatives. UBS Warburg’s e-FX platform FX Option Trader, for example, offers price transparency in options, giving users access to live, tradable market prices, and this continues to be a focus for the bank.