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
After 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.
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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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Did the unit make any money or was it a loss-maker?
Will they continue to provide services as central counterpary for Solid-FX and lmax interbank ?
^Good questions Andy. I will add: What made them retain LMAX as a client but shed their PB business?
The article is vague in this regard, although I guess if a public company is losing money they want to say as little as possible so not to scare investors.
@rtisafool – Thanks for the feedback. We report all the trading volumes as soon as they come out as our readers expect from us, if there are big factors obviously influencing the metrics we mention them. Deeper analysis will follow when we can get to the bottom of the matter.
@rtisafool – Thanks for the feedback. We report all the trading volumes as soon as they come out as our readers expect from us, if there are big factors obviously influencing the metrics we mention them. Deeper analysis will follow when we can get to the bottom of the matter.
Rabobank is a private bank, which makes it even more difficult to obtain any information in this regard from them. They have been one of the best capitalised banking institutions in the world, consistently ranking amongst the top 10 safest banks. I would guess sporting their Tier 1 capital ratio is the direction they want to keep focusing on after the LIBOR scandal has shattered their otherwise solid reputation. Revenues have dried up in this business, with many retail brokerages offering tighter spreads than the interbank market. Some people claim that it is unsustainable, I would argue that the banks… Read more »
^^Thanks.
When you say unsustainable, do you mean retail outfits offering tighter spreads than “interbank(s)”, or do you mean that banks must lower their spreads?
Do you think that retail/dealer aggregation will actually surpass the older style forms of banks holding the risk? When a broker says ‘we pass the trade directly to our liquidity provider’, how far does that trade go in the food chain before Tier 1 bank sees it?