One bank's loss is another bank's gain

It seems JP Morgan's efforts to ramp up its electronic FX and prime brokerage business over the past year or so, combined with its strong credit, is paying dividends, and market sources report the US bank has been snapping up Lehman Brothers' and AIG's high-frequency trading clients. To one market source, it didn't even appear this community of clients was being shared that much with other banks, such as Deutsche Bank, that also have strong credit.

An area in which Lehman Brothers was prominently active was the retail FX market, being described as one of the better liquidity providers. It's no secret the US investment bank had one of the most advanced liquidity management systems in the industry. This enabled it to effectively monetise burgeoning flows from the retail market.

According to some quarters, banks that are likely to gain from its departure, with increased retail flows, are Citibank, Dresdner Kleinwort, UBS, Deutsche and, again, JP Morgan. Some say there's now also room for newer players, such as BNP Paribas, to make their mark.

As one market source said, every time somebody falls, someone else will take their place. He cited Dresdner as a great example of a bank that led e-FX in its early stages with an AVT spin-off platform, Piranha. A combination of internal issues at the bank and the fact that it became surpassed by others with newer, more powerful, technologies meant the German dealer fell off the radar.

However in the past two years or so Dresdner has slowly come back, performing well - although still largely under the radar. The bank is quietly complimented for its excellent price feed and customer service. According to one client, Dresdner just has a small franchise, but that's a question of budget.

Indeed, the biggest problem for the bank in the past three or four years was finding affordable salespeople, given they all came at a premium. Now they're lining at the door. As the client said, it's just up to Dresdner to pick them up.