Currency trading has thus far escaped the regulatory scrutiny faced by most of the other large bank business lines. Combined with a jump in currency volatility this year, it's unleashed an intense fight for market share.
Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS) - smaller players in FX - have stepped up their efforts to take business from traditional giants Deutsche Bank (DB), Barclays (BCS), and JPMorgan (JPM), according to those in the know. Smaller firms like BTIG, Newedge, FXCM, and Gain Capital (GCAP) have further fragmented the market.
The lack of regulatory zeal means banks can fund currency trading with less capital than other lines of business. FX contributed just 8% of FICC revenue in 2012, down from 36% 4 years earlier.
Average daily trading volume of currencies was $5.6T in June, up from $4.9T in May.