Rabobank Exiting FX Prime Brokerage, Cites Lack of Complete Fit with Their Business Strategy

After a tumultuous 2013 which saw Rabobank fined by the CFTC and FCA for their involvement with the LIBOR manipulation
Photo: Ron Finberg

rabobank logoAfter a tumultuous 2013 which saw Rabobank fined by the CFTC and FCA for their involvement with the LIBOR manipulation scandal, resignation of its CEO Pieter Moerland, and 2% decline in profits, Forex Magnates has learned that the Dutch bank is exiting the Foreign Exchange Prime Brokerage (FXPB) business. Explaining the decision, a representative from Rabobank confirmed the news, stating to Forex Magnates, “The bank considers these specific activities to only partially align with our strategy. We will support the clients affected, through the diligent winding up of the relevant services.” The decision is similar to last year’s exit by Rabobank from the equity derivatives business, where the bank stated that the unit wasn’t meeting a core role in their overall strategy, as reason for the actions.

The decision by Rabobank to exit occurs as the unit has been in the news several times this year. In April, it was reported that Rabobank’s Head of Prime Brokerage, Peter Plester, had moved to Saxo Bank. Also in April, Rabobank and Integral parted ways, with each side no longer supporting the other’s services. Among Rabobank’s customers include LMAX and Boston Technologies.

Providing clearing and credit to financial institutions, prime brokers are an integral player in allowing firms and exchanges from around the world to trade with each other. In FX, due to tighter banking regulations requiring increased levels of minimum capital as well as increased reporting and legal expenses related to operating in the space, prime brokers have been stricter with their allocation of capital. As a result, so called Prime of Primes, have been able to grow their market share by providing credit services to smaller firms unable to access FXPB’s directly. Rabobank itself was considered a bit of a ‘tweener’ as they were a primary bank offering direct credit lines to the interbank FX market, but also serviced lower capitalized firms that Tier 1 firms like the JPMorgan and Citi’s of the world ignored. Their exit is thus an opportunity for prime of primes to gain additional clients, but creates a void of lower end primary bank offerings.

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