Citigroup goes down the retail route again… will it stay this time or follow CitiFX’s fate?

Citigroup bit off the hand that fed it in 2015, castigating FX brokerages in a damning report which resulted in tightening liquidity conditions. Now it courts the retail market again via the back door. Will there be tumbleweed blowing across their floor?

Citigroup’s corporate strategy over the past ten years has resembled the external appearance of a chameleon.

The company had spent over 17 years as the largest Tier 1 interbank FX dealer in the world by market share, however it was very quick to kick its core business participants in the metaphorical teeth in 2015 when it launched a report stating that it anticipated OTC derivatives brokerages to which it provided all of that liquidity which kept it in top position for so long were likely to have a 56% default ratio on their counterparty credit agreements.

This report circulated to other Tier 1 banks and suddenly it became almost impossible to establish and maintain counterparty credit agreements with Tier 1 banks unless a liquidity taker of any kind was able to demonstrate a balance sheet of over $100 million. In the early part of last decade, it was possible to keep a good relationship with a Tier 1 liquidity provider with a balance sheet of just $5 million.

All of that backtracking on its own core business coincided with Citigroup’s brief foray into the retail FX market, with CitiFX Pro, which was an interesting diversion by a traditional market leading Tier 1 bank into the retail sector, something no other firm has done, unless we can consider Credit Suisse’s investment in the establishment of FXCM’s FastMatch ECN which now belongs to Euronext, and has become one of the examples of exchanges attempting to merge and acquire their way into the retail sector.

CitiFX Pro was short lived, and in 2015, Citigroup shut it down and offloaded its clientbase to FXCM.

This week, Citigroup appears to be reassessing its position with regard to expanding into supporting non-institutional businesses, this time with its investment in low code platform Genesis Global Technology in an effort to drive business workflow efficiencies across multiple business lines in the non-bank financial sector.

Specifically geared toward financial market, the Genesis low code application platform tackles direct automation use cases, such as End User Computing (EUC) replacement and client servicing portals, alongside more complex opportunities including automating end-to-end electronic trading workflows and mobile framework applications.

Nikhil Joshi, the senior executive at Citi which oversaw this stated “The low-code application development paradigm has increasingly gained momentum in the financial industry and has the potential to change the way the industry develops applications in the future. Genesis complements our mainstream application development methodologies, and integrates with them quite well. We are very much looking forward to partnering with Genesis to accelerate Citi’s digitization journey.”

The investment in Genesis was made by Citi via its Markets FinTech Investments and Sprint groups for an undisclosed value, however this is indeed an interesting move for a company that has shown utter disdain for the business sector it has profited so greatly from in the past and now wishes to do so again via this technological means.

Going back five years, the majority of the clients of CitiFX Pro had been institutional traders, with a collective deposits pool of over $50 million at the time the company closed it down. As CitiFX Pro relied heavily on liquidity from the bank’s own liquidity division, it appeared the tightened conditions had pushed the management to put it on the market, again showing Citi’s disinterest in extending OTC credit even to other divisions of its own company, let alone brokers who have kept Citi at the top for 17 years prior to 2015. No wonder XTX Markets now takes the top slot, as that is a company that genuiunely understands the retail FX and OTC derivatives market and can provide an appropriate service.

It will be interesting to see who takes up the newly acquired solution, but our guess is that the OTC derivatives sector won’t be rushing to form an orderly line.

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