Deutsche Bank, #1 global FX liquidity provider for the last five years, has stopped providing FX pricing to most or possibly all of its liquidity aggregator customers. These include ECNs, DMA providers, Tier 1 and 2 Prime Brokers. Typically these firms cater to mid-size retail brokers, hedge funds, Commodity Trading Advisors larger, and more active retail forex traders.
It is unclear whether they have also stopped pricing retail aggregators such as FXCM, Alpari, and Oanda. However this is highly unlikely given the profitability of retail trading flow, and the fact that the largest retail brokers are Top 10 customers of Deutsche and the other major FX banks.
Has Deutsche Bank said why they have stopped providing FX pricing to most of its liquidity aggregator customers?
Not to my knowledge. Our suspicion is that it is very difficult for them to control the client flow they receive when they are at least one step removed from their customer. This means they face potentially hazardous flows (AKA toxic flows) from the likes of algorithmic traders, arbitrageurs (particularly latency arbs), and other high frequency traders. The end result? The flows they do get from these venues are probably not nearly as profitable as what they get from their core direct customers. So it seems like a strategic decision to focus on their core business. Again, this is not their statement but our commentary on the move.