Citigroup Inc is seeking a buyer for its retail forex brokerage CitiFX Pro as part of efforts to streamline the banking world’s biggest currency trading operation, a source familiar with the situation notified Reuters on Tuesday.
Citi has cut staffing and computerized many elements of its currency business in recent years. Market sources say it has aggressively rationalized its institutional client base in the “prime broking” sector since the start of this year.
But the sale would come at a time when other banks are beginning to think about reinvesting in currency trading, drawn by an improvement in volumes and returns over the past year.
CitiFX Pro is the bank’s easily accessible online forex trading service, offering professional individual traders and smaller institutional players access to 130-plus currency pairs on several platforms backed up by Citi infrastructure.
It is part of a sub-sector of the forex market whose reputation has taken a hammering since the collapse of a handful of businesses, and hefty losses for others, after the Swiss franc’s surge in January.
New York-based Citi has pared back internationally in recent years, pulling out of retail banking in markets such as Japan. Industry surveys continue to rank it as the single biggest banking player in the $5 trillion a day forex market.
It has been a tumultuous few years for banks’ currency trading businesses, hit by a raft of scandals and regulatory inquiries which has seen dozens of the market’s most senior traders leave their jobs or be suspended.
Changes in the regulatory environment and capital requirements have also made it more costly to run trading operations like FX that provide huge leverage and conduits for trade to hedge funds and other big financial institutions.
But there has been a growing sense in recent months that banks are feeling their way to new business models that factor in all of the new rules and conditions they face. At the same time, everyday market volatility, which drives up volumes of trade and the amount bank dealing desks can make from trading, has surged threefold on major currencies.
“You will see banks investing again in FX now. It has been one of the best performing segments over the past year and that has drawn attention,” said the head of one London-based brokerage, previously a head of trading with one major European bank, speaking on condition of anonymity.
“Like most parts of the business the model does not quite work, but it is very close to giving banks the return on equity they need. So the way to do that is to invest while continuing to automate aggressively.”