Continued decline of the one-stop shop

This article is part of our Dealer Rankings 2024 coverage. You can find the overview article here, analysis of the results by instrument and end-user here and a detailed methodology here. 

Last year’s rankings showed most dealers had left behind the old, chest-thumping goal of being all things to all people. Only three landed on the top 10 lists across all of the instruments in the rankings, and across both client groups.

This year, that number is down to two – JP Morgan and Morgan Stanley. And the latter is hanging on by its fingertips, with three tenth-place finishes for insurers.

The missing member of last year’s trio is Bank of America, after last year’s ninth-place for foreign exchange forwards with life insurers became a sixteenth this year. It’s in good company, though – several other dealers appear to have gone cool on a product that can generate huge notional positions and acts as a capital hog under new rules for counterparty credit risk.  

That leaves JP Morgan as the last of the one-stop shops. With mutual funds and ETFs, the bank has six top three finishes – more than any other dealer, helping it to a share of the lead for this client group. With life insurers, JP Morgan has a single top three, but in the remaining six instruments, it finishes between fourth and seventh, landing it in fourth place overall for the group.

The yardstick we’re using to determine a bank’s ambitions is the frequency with which it shows up in quarterly filings from funds and insurers – the aggregate notional of all the trades where it was named as counterparty, the number of tickets, the number of clients, and the year-on-year growth in each of those metrics. It’s not a perfect divining rod, but it says something about each bank’s footprint, and about their momentum. Please read the summary methodology in this article for more background, or click here for more detail.

Vertical dominance

So, if the trend has been away from megastores – and towards dominance in specific verticals – who stands out?

Most obviously, Citi. Like others, the bank appears unwilling to throw huge resources into FX with these client groups. It is also outside the top five in our single equities instrument. But in most of the rates and credit instruments, Citi either improved on last year’s position, or held on, giving it an impressive slate of eight top three finishes from the 11 available products. No other bank performed as well, on average, across these two asset classes, and the points it racked up here propelled Citi to top spot in the overall rankings.

Although it slipped in the overall rankings, Morgan Stanley could crow about its strength in rates products for mutual funds and ETFs – the bank improved on last year’s positions in interest rate swaps, inflation swaps and swaptions, finishing second, first and first, respectively. In keeping with the general trend, though, the dealer was far less prominent for these products with life insurers.

Barclays also improved significantly in mutual fund rates products, taking third for rate swaps and swaptions, and fourth for inflation swaps. It is also a single-name credit default swap powerhouse, finishing third for this instrument with mutual funds and life insurers.

Unlike Morgan Stanley and Barclays, Deutsche Bank appears to be focusing more heavily on life insurers in the rates space, where it takes first spot in swaptions, second in inflation swaps, and fourth in interest rate swaps.

For FX products with mutual funds, Bank of America and BNP Paribas stand out. The former is first for options, second for forwards; the latter is second for options and first in forwards. 

JP Morgan’s best haul is in credit products for mutual funds, where it takes a first in options, second in single-name CDSs, and third in index CDSs. In both options and single-name CDSs, the bank jumped five spots when compared with last year’s rankings.

In keeping with its reputation, Goldman performs well in options instruments, generally: along with its first in equity index options with insurers, the bank took second in credit options, third in FX options, and fourth in swaptions with mutual funds and ETFs.

Outside of the biggest names, plenty of other dealers have managed to carve out a niche. Wells Fargo is a strong house for rate swaps and swaptions with insurers, jumping four spots and three spots in those instruments this year, to finish second in each table.

UBS is absent from all bar one of the top 10s with insurers, but appears in four with mutual funds, including a third place in the densely populated FX forwards market. Mizuho’s strength is the other way round – entirely absent from the top mutual fund dealers, it appears twice with life insurers, for swaptions and FX forwards.

There is also a small crop of US regional banks that pop up – very selectively – in certain products. Most notable is Truist, which is fourteenth overall for index options with life insurers and was also named as a counterparty for some rate swaps with the same client group.

A detailed look at each of the dealers in this year’s overall top 10 can be found below. 

Citi

Where Citi was strong in this year’s data, it was very strong – for mutual funds, it had six top three finishes, and one fourth place. Where it was weak, it was very weak – the blot on its mutual funds copybook was in foreign exchange, where it finished twelfth for forwards and eleventh for options.

The bank was a little bit patchier for insurers, where it finished in the top 10 for all seven instruments, with positions ranging from first for inflation swaps to seventh for equity index options – and every rung of the ladder inbetween.

The combination of its mutual fund and insurer standings was good enough for first in the overall rankings – a jump from fourth overall in the prior year’s data.

That jump is based on year-on-year improvement in most of the underlying instruments. When the data is decomposed into 16 individual markets – nine mutual fund instruments and seven insurer instruments – there are only four where Citi ranked lower in 2023 than in 2022. In nine of these markets, it climbed the table.  

As a result, Citi now boasts a stellar set of results across the 11 rates and credit instruments covered by the data, where it has the highest average placing of any dealer. Across these markets, Citi has three firsts, two seconds, three thirds, two fourths, and a single fifth – its lowest mark.

Based on the 2023 data, the bank doesn’t seem particularly focused on tackling its weak spots in FX and equities. For FX forwards with mutual funds, Citi gets most of its points from the size of its book, its tally of tickets, and the length of its client list – the ‘gross’ points – where it is the sixth-ranked dealer. When gathering points for year-on-year growth in those metrics – the ‘increase’ points – Citi is ranked twenty-seventh. There is a similar disparity for FX options with mutual funds – Citi is sixth for gross points and sixteenth for increase points. For forwards with insurers, Citi is second for gross points and eleventh for increase points.

The strategy – it seems – is to be present for clients, but not to fight for share.

For index options – where data only exists for trades with life insurers – Citi’s performance is more balanced. The bank gets exactly the same number of gross and increase points, and it is prominent in some of the underlying cuts – third for year-on-year increase in book size across all trades, top for increase in book size for longer-dated options, and top for increase in book size on two of the five most popular underlying indexes.

Bank of America

Despite taking first place in three instruments – a record identical to that of Citi – Bank of America finished one spot behind its rival in the combined rankings. BofA did, though, finish joint first in the mutual fund leaderboard, the client group where it racked up all three of its first-place finishes – in index CDSs, FX options and repo.

For insurers, BofA repeated last year’s second-place finish, but slipped four spots in interest rate swaps, three in equity index options, two in swaptions, and vanished from the top 10 altogether in FX forwards – last year’s ninth place became a sixteenth in the latest set of rankings, leaving the US bank behind Crédit Agricole and Bank of Montreal, among others.

As revealed when the Dealer Rankings were calculated for the first time, strength in an instrument with one client group does not necessarily translate into strength across both sets of clients – presumably because competition is fiercer in one or the other, or because a bank has decided to prioritise a particular client profile.

A stark example of this comes from the BofA data, where the bank’s slump in FX forwards with insurers was accompanied by a surge from eighth to fourth with mutual funds.

But there are other cases where the bank is moving in the same direction with both client sets. In particular, the bank seems to have made an index CDS push during 2023. BofA was first with mutual funds – up four spots since last year – and fourth with insurers, up two places. The bank does not have the biggest book with these client groups – it is only sixth for book size with mutual funds – and it gained most of its points via cuts of data that reflect year-on-year growth.

Growth can be difficult to deliver for dealers that already have a big share of a particular market, though, and that may be behind BofA’s performance in interest rate swaps. Last year, the bank finished on top of the pile for both client groups. In the 2023 data, it gives up four spots in both charts – BofA still had the biggest book, the longest client list, and the second-highest tally of tickets for swaps with mutual funds, but many rival dealers posted higher year-on-year improvements in those metrics – BofA was eighteenth for notional growth, for example. By allowing banks to rack up both gross and increase points, the rankings methodology makes it tough to stay at the top.

JP Morgan

Last year, three dealers appeared in the top 10 for all instruments across the two client groups. This year only two repeated the feat: JP Morgan and Morgan Stanley.

JP Morgan tied for first place in the mutual fund rankings with Citi, but a drop from third to fourth with insurers also saw the bank slipping one place in the overall table, from second to third.

Jumping six spots in equity index options with insurers – to finish second behind Goldman Sachs – was not enough to offset slips in other instruments. JP Morgan dropped five places in single-name CDSs, three in interest rate swaps, and two spots each in swaptions and index CDSs.

With mutual funds, JP Morgan slipped six places in FX forwards and repo, but jumped five in both credit options and single-name CDSs, where it now ranks first and second, respectively. The bank held on to last year’s third place in index CDSs, making credit a bastion of strength. 

Competition in credit options was fierce, with three points – less than 1% of the total – separating JP Morgan in first from Goldman and Citi in second and third, respectively.

Goldman Sachs

In a topsy-turvy year for Goldman, the dealer slipped from third to fifth with mutual funds but climbed from fourth to third with insurers – the net result being a one-rung drop from third in the overall table to fourth (together with Morgan Stanley).

There were some eye-catching changes in the individual markets. Across the nine mutual fund instruments, Goldman went backwards in five – sliding five places in index CDSs, three in single-name CDSs, swaptions and inflation swaps, and two in interest rate swaps.

In repo, it again finished outside the top 10 – the business has become unpopular with some US dealers because of its balance sheet impact. But in another business that has sometimes been shunned over its capital impact – FX forwards – Goldman leapt from sixteenth to fourth. Among US dealers, Goldman posted the biggest year-on-year increase in tickets. It also saw the biggest increase in tickets – among all dealers – for G10 currencies. And it was particularly strong in Americas currencies, where it has the biggest book of all dealers, and posted the biggest increase in tickets.

Among life insurers, Goldman jumped five spots – into first place – in equity index options. It wasn’t particularly close. Goldman gathered 8% more points than second-placed JP Morgan, and it seems to be on the march: the bank hauled in 19% more increase points than the second-fastest grower, Societe Generale.

Morgan Stanley

As noted above, Morgan Stanley was one of two banks that appeared in the top 10 for all instruments for a second year in succession. It did so by the skin of its teeth.

For insurers, after slipping seven spots in swaptions and three in interest rates swaps, Morgan Stanley finished tenth in both, but jumped two spots in inflation swaps to tie with Societe Generale for the eighth place.

It was a very different story in rates instruments with mutual funds, where the bank improved its standing in all three – up one place for interest rate swaps, three for inflation swaps, and two for swaptions – to finish with two first places and one second.

The disparity in performance between the two client groups may reflect the different trading behaviour of each. As a rule, insurers tend to execute larger, longer-dated hedges, and leave them on the books, while mutual funds are more likely to trade in and out of their positions – in theory giving dealers more chance to collect bid/offer spread, and generating more fluid, less capital-intensive portfolios.

Morgan Stanley’s showing in inflation swaps for funds was particularly strong. It’s not a well-populated market, and the number of competitors is shrinking – only seven dealers were named as counterparties in 2003, down from eight last year, as HSBC vanished from funds’ filings. In this environment, Morgan Stanley made hay, racking up 26% more points than its nearest rival, JP Morgan. For all inflation trades, it did not have the biggest book, or the most tickets – where it was second to JP Morgan – but it had the longest client list and was top for year-on-year growth in book size, tickets, and clients. It was also dominant in longer-dated trades and trades referencing eurozone inflation.

Outside of rates, though, Morgan Stanley went backwards in mutual fund rankings for the three credit instruments and both FX products. In the overall mutual fund standings, the dealer finished fourth, down from first. For insurers overall, it slipped from first to fifth in a tie with Barclays. In the combined rankings, it finished fourth together with Goldman after being on top of the pile last year. Only Credit Suisse suffered a larger fall.

Barclays

For a second consecutive year, Barclays was the top non-US dealer in the rankings, finishing sixth. It came close to breaking into the top five, though – with a points total that was 2% less than Morgan Stanley’s and 4% behind that of Goldman.

A loss of two spots in the aggregate tables of trading with insurers – from fifth to seventh – had little impact on the UK bank as its stellar performance with mutual funds and ETFs gave Barclays the second spot on these rankings behind JP Morgan and Bank of America.

Barclays’ rates desk – historically one of its strongest elements – should take the credit for most of that success as it delivered on all relevant instruments and across the two market segments. The overperformance was more apparent on the mutual fund side where Barclays gained seven spots in swaptions, five in interest rate swaps and four in inflation swaps. With insurers, it moved up one spot in interest rate swaps and retained its sixth place from last year in inflation swaps.

On FX instruments, Barclays gained three spots in forwards trades with mutual funds but lost as many in options, and it dropped out of the forwards top 10 with life insurers.

Credit trading was among Barclays’ weakest spots. It lost five spots in credit options (among the eight competing dealers, it garnered the smallest amount of increase points) and one in index CDSs with mutual funds, but it gained one place in single-name CDSs. With insurers, the blow from the loss of one spot in the single-name CDS table was softened by the bank’s entry into the top 10 of the index CDS rankings, where it now occupies eighth place.

BNP Paribas

The French dealer stayed put in the mutual fund and insurer rankings, and on the overall leaderboard, but there was plenty of movement at the instrument level – and signs of continued ambition in many of the underlying cuts.

In FX forwards trading, BNPP moved up five spots in both the mutual fund and the insurer rankings, winning the top spot in the former category. Mutual fund forwards trading is highly competitive, with 37 dealers named as counterparties in the 2023 data – second only to the 42 dealers competing for mutual fund repo business – and a real mix of names in the underlying cuts. Across all forwards trades, Bank of America had the largest book in this year’s data, with Morgan Stanley named on most tickets, and JP Morgan boasting the longest client list. For year-on-year increases, Wells Fargo was top for notional, HSBC for tickets, and Nomura for clients.

But BNP Paribas is always there, or thereabouts. As the cuts and points accumulate, the French dealer eventually rises to the top by racking up more year-on-year increase points than its near rivals.

And BNPP’s successes don’t end here, as it also jumped seven spots in the life insurer interest rate swap rankings, beating another fast-growing dealer – Wells Fargo – into second. The Counterparty Radar tool shows most of BNP Paribas’s swaps business in 2023 continued to come from the sector’s two titans, Mass Mutual and John Hancock.

On the flip side, BNPP lost three spots in mutual fund rates swaps, and two trading inflation swaps with insurers, where the French dealer also fell out of the top 10 for swaptions. A loss of three spots in equity index options with insurers brought BNPP to eighth in that table.

BNPP also lost its first place in the repo rankings, finishing second behind Bank of America.

Deutsche Bank

The German dealer continues to have a strong rates business with life insurers, finishing top for swaptions, second for inflation swaps and fourth for interest rate swaps – enough to propel Deutsche to eighth spot overall with this client group.

But options trading was Deutsche’s biggest growth story this year, with the bank gaining four spots in FX options trading with mutual funds and three in insurer swaptions.

In the latter category, Deutsche frequently appears at the top of the underlying cuts – for book size and increase in book size for all trades, in the same cuts for longer-dated and larger trades, and for swaptions referencing SOFR.

Deutsche’s fifth place in FX options with mutual funds was the result of a larger client roster, and frequently topping its European rivals in the underlying cuts – Deutsche added more clients overall than the seven European names in the market and was also top of the client-growth cuts for Chinese renminbi trades and Mexican peso trades. It saw the biggest increase in its yen options book of all dealers. 

This kind of trajectory is not always sustained, though. An increase in new index CDS clients – in the funds space – that was highlighted in last year’s rankings did not turn into better performance this year, as Deutsche dropped a spot to seventh.

One curiosity: Deutsche appears to still have some long-dated equity option trades on its books with life insurers, despite announcing its exit from that business in 2019. The German dealer was named as a counterparty often enough to finish second from last in that category among 25 competitors.

Wells Fargo

The appearance of the San Francisco-based bank in the top 10 should not be a huge surprise – it was eleventh last year, and the two dealers that placed above it were Credit Suisse and HSBC, both of which have more or less disappeared from the map in this year’s data.

What’s more surprising is the manner of Wells Fargo’s appearance – it has not cracked the top 10 by default, but by showing significant ambition in selected instruments.

Wells Fargo gained four and three spots, respectively, in the insurer interest rate swap and swaption rankings – it placed second in both instruments. On top of that, the bank also appeared for the first time in mutual fund top 10s for swaptions, index CDSs and FX forwards. In the latter instrument, it collected more year-on-year increase points than any other dealer, finishing tenth overall by virtue of its smaller initial footprint.

Its success in interest rate swaps was driven primarily by year-on-year increases, where it again racked up more points than any other bank. For all trades, it had the biggest increase of 29 banks for book size and for tickets. It was also top for notional growth in G10 currencies and was the only bank to have executed any tickets with a notional of more than $1 billion – our Counterparty Radar tool shows those trades are all with MetLife. Wells Fargo can also boast the second-biggest book of SOFR trades with life insurers, and the second-biggest year-on-year increase in SOFR trading. 

It repeated the feat in swaptions by scoring the highest number of new clients and the biggest increase in tickets.

It wasn’t all positive for the West Coast bank, though – Wells Fargo dropped two spots, to ninth, for index options with insurers, and it vanished from the top 10 for credit options with mutual funds.

UBS

Last year’s thirteenth spot in the overall table becomes this year’s tenth – but that’s almost entirely on the back of UBS’s business with mutual funds and ETFs, where it appears in the top 10 for four different instruments. For life insurers, UBS has a single tenth-place finish for index options.

One of the questions posed in last year’s rankings was whether UBS would inherit Credit Suisse’s strength with US life insurers – CS generally performed far better than its acquirer in the last set of data and was ranked a top 10 counterparty for four of the six instruments where it was named as a counterparty in insurer filings. UBS, by contrast, was not a top 10 dealer in any of the five instruments where it appeared as a counterparty.

The latest set of data shows the two heading in opposite directions. Credit Suisse slips from sixth to ninth in interest rate swaps, from fourth to eighth in inflation, from seventeenth to nineteenth for swaptions, from eighth to eleventh for single-name CDSs, and from fourth to tenth for index options. It hangs onto last year’s twenty-fourth spot for FX forwards.

UBS, in contrast, goes from fifteenth to eleventh in rate swaps, from fourteenth to twelfth in inflation, and from twenty-first to eighteenth in swaptions. It also holds onto twelfth spot for index options. So, it’s now on the edge of the top 10 in three instruments.

It’s not clear how much effort UBS is putting into this push, but this year has seen it mount a concerted charm offensive with other US clients.

“UBS has been doing this roadshow, trying to get more business from everybody. They’re much more aggressive now on their pricing,” says the head of trading at one hedge fund.

With mutual funds, UBS was already an active, well-regarded dealer, and it remains so in the latest data – overall, it retains eighth place for this client group. At the instrument level, there are wins and losses. Most notably, UBS is now seventh for interest rate swaps, having been thirteenth in 2023. It also retains third spot for FX forwards. For inflation swaps and FX options, UBS slips, but remains in the top 10. For swaptions, index CDSs, and repo, the Swiss dealer loses a place or two and remains outside the top 10.

For FX forwards with mutual funds – its sole top-tier spot with either client group – UBS scored the second-biggest year-on-year notional increase in the instrument year over year, driven in particular by growth in sterling, Canadian, and Aussie dollar trades.

Editing by Duncan Wood