Foreign Exchange Market
The global foreign exchange (forex) market has ballooned in recent decades as more and more economies liberalise their capital accounts. The Basel-based Bank for International Settlements said average daily turnover in global forex markets was an estimated US$3.98 trillion as of April 2010.
Deutsche steps into retail forex trade
German bank offers 24-hour online services in crowded sector
Deutsche Bank, which takes pride in being the world's No1 foreign exchange trading bank for institutional investors, has stepped into the retail forex market, where it can expect to jostle with a multitude of local banks and brokers.
The bank introduced recently an online trading platform that lets retail clients conduct margin trading around the clock via the internet.
'We are expanding the platform to retail investors due to investor demand. We are offering both flexible services like the small brokers and the strength of a major bank,' said K.Duker, head of global liquidity services for Asia-Pacific at Deutsche Bank.
'It won't happen next week, but in three to five years, retail forex trading should represent about 30 per cent of our foreign exchange trading.'
Other bankers, while recognising that the move into retail trading is a natural evolution for Deutsche Bank, say without a large retail client base in Hong Kong, the German lender may find it hard to lure business away from local banks and brokerages.
According to the Securities and Futures Commission, most commercial banks and 21 brokerages offer foreign exchange trading services targeting smaller clients.
'The retail foreign exchange market is very crowded in Hong Kong. It's extremely competitive,' said Joseph Tong Tang, executive director and chief executive of wealth management, capital markets and brokerage at Sun Hung Kai Financial.
Another local banker who declined to be named said Hang Seng Bank and Bank of China were the leaders in the local forex market.
'These banks have large depositors and a retail client base. They can easily cross-sell them their retail forex trading services. Deutsche Bank may find it hard to establish such a big base,' the banker said.
The other challenge for Deutsche Bank would be to overcome the preference of local investors Mr Tong said.
'Among our retail customers, seven out of 10 trade stocks. The rest are equally spread among forex, bond and derivatives trading,' he said.
Mr Duker, however, said foreign exchange trading was one of the fastest-growing investment markets and a handy trading platform with good services and pricing that should attract clients.
He said global foreign exchange trading volume was expected to reach US$3 trillion per day this year, up from US$2 trillion last year and US$1.7 trillion in 2004.
Asia accounts for about 20 per cent of all foreign exchange trading, and Hong Kong and China between them generate 10 per cent of the total, or almost US$300 billion a day.
'One-third of all foreign exchange trading is retail trading and it is growing about 30 per cent a year. There are huge business opportunities,' Mr Duker said.
Aside from the most frequently traded units - the euro, the dollar and the yen - there was a large market for the Australian, Canadian and New Zealand dollars, he said.