Euromoney crowns Deutsche Bank as top FX provider for 2008

Euromoney announced its yearly poll results today naming DB as world's largest FX provider by market share.

Aggregating data from world's largest banks and institutions Euromoney claims that DB is the largest player in the market controlling almost 21% of it. UBS and Barclays Capital are far behind with %14.5 and %10.5 of the market share respectively.

Euromoney claims that "Leading FX banks are enjoying record profitability. Volatility in FX markets has combined with slightly wider bid/offer spreads to drive revenues higher. FX, together with other flow business, such as money markets and rates, has been one of the main drivers of improved results from investment banking units in the first quarter of 2009."

Yes, we know: Volatility equals high income to FX brokers whether they are market makers or only channels to Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term pools (STP, ECN).

Although the results might seem impressive at first sight I however have big issue with Euromoney's methodology. A while ago I even subscribed to their premium services, which aren't that cheap, only to unsubscribe few days later after understanding their somewhat controversial methodology (and irrelevance to my main interest - Retail Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term).

Poll results are achieved by simple questionnaire that is sent to individuals (12,510 of such this year) working in world Forex dealing institutions such as the ones named above. These individuals are then asked to 'estimate' their trading volumes with top 10 of their counterparties and report the results. The problem is that these are unofficial figures backed only by estimates, accuracy of which is somewhat dubious.

Incentive to smooth the results is clear: if you identify with your bank why not bloat the figures a bit in order to try and place it higher in the ranking order? I'm not saying the results are fake, but rather that they should not be treated as official and fully reliable figures.

In any case, Euromoney's reach to all of these financial institutions and its ability to cover an aggregate volume of $175 trillion (which is about 25% of what Bank of International Settlements covers) is certainly impressive to say the least.

Who wouldn't want their mailing list?

Michael