Coming off of one of the biggest trading scandals in Forex, Citibank announces that it will sell its margin Forex book to FXCM. Coincidence, maybe but this could be a sign that banks are looking to limit or eliminate all regulatory risk and having retail clients exposes banks. Citibank will pay $925 million in criminal fines and $342 million to the Federal Reserve. It probably didn’t take executives and analysts long to figure that the risk-reward for the bank was not worth it. There is also an apparent conflict of interest as Citibank acts as a significant liquidity provider in the interbank market. Citibank cited the move as a way to streamline operations which might be true to a certain extent.
FXCM is an interesting choice for the move since FXCM is experiencing its troubles post the SNB debacle. With their stock price hitting all-time lows the rush is on to improve their numbers and pay back the bailout from last January. The Citibank clients from Singapore will be moved to Saxo Bank, and the ones from the US will move to FXCM.
This move outlines the importance and needs of Forex Brokers in facilitating the Retail Forex Market. The Forex Market has identified roles for market participants. It looks like going forward these roles will be held, and institutions like Citibank won’t be trying to cross over and fill a position that it should not. Forex Brokers should act as the link between the banks and the retail trading public. In the meantime, we will wait for more changes to come to hopefully improve both Forex Brokers and Banks can look out for the best interest of the retail trader.