Forex profits soar as funds up risk

Citigroup and State Street both reported surges in first-quarter foreign exchange revenue last week on the back of increased activity from fund managers, senior officials told RiskNews’ sister publication, FX Week .

James Kemp, head of foreign exchange for North America at Citigroup in New York, said clients have been willing to invest more in the forex markets then they were 12-18 months ago, especially on the leveraged side of the business.

Hedge fund clients have been a major focus for Citibank in the past 18 months, and this sector has proved a particularly successful part of its business, said Kemp. The drive began in October 2001 with the hire of veteran hedge fund sales specialist Anu Jayanti as the new head of sales for leveraged institutional clients in New York.

Citigroup reported an 18% rise in its foreign exchange trading related revenues for the first quarter to $559 million, up from $472 million for the corresponding period in 2003; forex trading revenues within State Street’s global markets group rose by 64% to $118 million for the quarter, compared with $72 million a year ago.

Year-on-year growth in customer activity at State Street reflected the bank’s foreign exchange revenue growth across client types, but for absolute return managers, hedge funds, commodity trading advisers and specialist currency managers the increase in activity was "north of 100%", said Mark Snyder, State Street’s global head of currency and money market sales and trading.

State Street’s success was also due to increased take-up of the firm’s capital flows research, he added. The bank now has 25 people at subsidiary State Street Associates in Cambridge, Massachusetts who produce quantitative research on capital flow-related products as well as risk budgeting tools.

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Stemming the tide of rising FX settlement risk

As the trading of emerging markets currencies gathers pace and broader uncertainty sweeps across financial markets, CLS is exploring alternative services designed to mitigate settlement risk for the FX market

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