Clients Reluctant to Switch FX Platform as Integration Deepens: Citi

Clients using technology providers and platforms for FX trading have become significantly more reluctant to switch providers since the turn of the decade, Citi’s fifth annual vendor review and client survey shows.

The US bank started its yearly vendor evaluation after a proliferation of technology providers and systems led to increasing costs and complexity for both Citi and its clients. It started very much as an exercise on the part of the bank to streamline its own operations, however demand from clients, and a decision to become more collaborative around technology in its FX business, led to a broader-based review.

“Our ultimate goal [for the survey] is to enhance connectivity, expand product offerings, bolster stability, and improve overall market operations to further benefit our clients, liquidity providers, and all other market participants,” says Ayesa Latif, global head of FX products at Citi.

As integration with existing providers has deepened, the cost of switching providers has clearly risen, but equally, several providers have clearly stepped up to the plate and improved their service and products, helping deliver client “stickiness”. This is reflected in the latest results in the Citi report that show 22% of those surveyed have changed vendors, compared to 51% in the 2021 survey. Citi says that the trend reflects closer relationships with existing vendors, many of whom have moved beyond traditional roles such as providing execution management systems, to playing critical roles in clients’ execution workflow.

Although deeper integration is now a feature of the industry – client satisfaction with primary vendors remains high at 90% – there is still demand for customisation and enhancements, with 85% reporting they have such requests pending. Most of these can be categorised around execution and workflow solutions to mitigate against operational and settlement risk.

An overwhelming majority of the bank’s customers view market impact as a crucial consideration when evaluating execution tools, with 85% noting this as a factor, while 94% say that vendors’ adherence to the FX Global Code of Conduct was key.

While clients want innovative solutions and enhancements, some vendors are struggling and face a challenge. Increasing infrastructure upgrade costs and evolving regulatory burdens, to name just two, means the overall challenge for vendors is an allocation of sufficient capital expenditure towards those client demands. Failure to commit this capital leaves room for competitors, the bank observes.

Additionally, it says it is critical for vendors to maintain client satisfaction levels to preserve revenue streams. This in turn hinders the ability to further innovate, potentially leading to a cycle of client attrition. A gradual loss of clients in a competitive FX landscape can have detrimental consequences, if not addressed proactively.