Royal Bank of Scotland shuts London FX prop desk
LONDON (Reuters) – Royal Bank of Scotland has closed its foreign exchange proprietary trading desk in London, the banking group said on Tuesday. “As a result of this decision, we will seek to find alternative suitable employment within the organisation for those affected,” the bank said in a statement. The closure affects at least six staff. Proprietary trading desks use their bank’s own money to trade in a whole range of different assets. A number of mid-tier investment banks have shut down proprietary trading desks recently, including Dresdner Kleinwort and also Commerzbank due to losses.
In foreign exchange for most of this year, currencies have been stuck in tight ranges, with volatility collapsing to record lows in some major currencies. But these ranges were broken in late November as the dollar faced a broad selloff, which pushed the U.S. currency to a 20-month low against the euro and a 14-year trough versus the pound this month.
RBS is ranked 5th by a 2006 survey of biggest FX banks by Euromoney magazine, with a share of 6.61 percent.
(Published on 5th Dec)
I find this article interesting because research on the microstructure of the foreign exchange market suggests that banks may be able to attain a forecasting advantage by using the information contained in their customer order flow books. However, and it’s just a thought, an implication of this article could be be that the informational advantage from knowing the house’s order book isn’t that significant. While this probably isn’t true for large financial institutions such as Citigroup, it could be correct for the smaller and medium sized players with lower market shares, whose orderbooks are less likely to be representative of the state of global orders in their entirety. Trading is tough.