New importance for derivatives trading in emerging markets


Many think Citi has more people on the ground around the world than any other funds manager. BTW: it’s probably not true. Fidelity or BlackRock probably have more people on the ground. But in one respect – to do with sophisticated derivatives trading – Citigroup certainly is the biggest and, arguably, the best.

In the current environment, with fully priced equities as well as bonds, and with private markets also booming and still charging high fees to boot, derivatives trading has become really important.

Jerome Kemp, Citi’s global head of derivatives clearing, says that with the investment world looking to target emerging markets like India and China, given the consensus on the developed world for long-term investors, access is getting crucial.

Citi, for instance, was one of the first big global banks to clear Korean won and Indian rupee interest rate swaps trades on behalf on a client in the Asia Pacific region.

Kemp said on a visit to Australia last week that OTC (over the counter) clearing revenues were showing impressive growth year on year. The firm expects “double digit” growth this year, following stronger growth last year.

Ian Nissen, the Asia Pacific head of futures, clearing and collateral for Citi, said: “Our Asia Pacific franchise is one of the fastest growing for Citi globally. We have a team of 34 people.

“With increased co-operation and intra-Asia trading links, strong growth in the need for futures, clearing and derivatives needs are coming from global names, and also, increasingly, from local and regional domestic names,” he said.

Citi believes it has the leading network across Asia to support these flows. For instance, partnerships with the stock exchanges in Singapore and Malaysia, China and Hong Kong, India and other countries give it a leg up over its competitors, Kemp believes. The company has had a presence in Asia since 1902.

Citi’s FCC is probably the world’s largest participant in exchange-traded derivative markets and has also established itself as a market leader in the evolving OTC clearing world.

Kemp also says that Citi is working on new developments to do with distributed ledger technology (also known as “blockchain”) and the next phase of derivatives trading.

“OTC has reached its maturity,” he says. “We are working on some really interesting things at the moment.”

Nissen says that he is starting to see an increased interest in collateral management. With big funds trying to optimise their positions. “We are looking to reduce performance drag for our clients,” he says. “Optimisation is going to be the next big development push.”

– Greg Bright