Citigroup, the largest provider of prime-brokerage services to firms trading currencies, is using that size to extract higher fees from clients, according to people familiar with the firm’s pricing.
Bloomberg News reports that Citigroup is raising prices for clearing and settling currency trades, according to four people with knowledge of the move, who asked not to be identified to preserve their relationship with the New York-based firm.
For at least some clients, the price climbed by roughly 25%, one of the people said.
'In light of the increased risks in markets, it’s sensible to expect a higher premium in order to continue to keep the lights on,' said Javier Paz, a senior analyst at Aite Group LLC.
Foreign-exchange prime brokerages provide clearing, settlement and financing for clients such as hedge funds, high-frequency-trading firms and retail foreign-exchange brokers. Once an institution has a prime-brokerage account it can trade anywhere that accepts the prime broker and will transact under that broker’s name.
The price increase means a client paying $1 for every $1 million traded would now be charged $1.25 instead.
Margins - the amount of collateral banks require in case a counterparty fails to pay - also have increased, making trades more expensive, two people said.
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