Deutsche Bank AG is promoting its online currency trading platform for retail investors, dbFX, to community banks and small institutional investors.
The Frankfurt company, which calls itself the world's largest foreign exchange bank, initially targeted individual investors when it introduced the system in 2006. Betsy Waters, global director of dbFX, said it is also suitable for hedge funds and small banks with proprietary trading desks.
Rather than individual traders, the biggest users of dbFX have turned out to be small institutional investors, she said in an interview Monday.
These money managers face a problem that is common for small businesses: Their needs are too complex for retail banking products, but they are too small to use online cash management.
A hedge fund with $1 million of assets under management cannot use Autobahn, Deutsche Bank's institutional trading platform, since the threshold for entry is $30 million to $50 million.
Foreign exchange is also a highly leveraged market, with margin requirements as low as 1%, so a $5,000 margin can hold a $500,000 currency position, she said.
She estimated that 75% of all forex traders are corporations, governments, or central banks that are using it not to seek profit, but to hedge risk or for international trade. Of the $3 trillion of daily global foreign exchange, about $60 billion to $100 billion is retail.
The dbFX platform offers real-time executable rates, news and research, stops and limits to close out positions automatically when the exchange rate crosses a threshold, and "trailing stops" that let traders lock in profits if the exchange rate moves, she said.
Citigroup Inc. introduced online foreign exchange trading in March for individual and small institutional traders in the United States. Its CitiFX Pro system offers trading services in more than 130 currency pairs.
The credit crisis is an opportunity, Ms. Waters said. "It brings volatility to the market. When people see volatility, they want to trade."
Though she said she was optimistic for continued growth, she acknowledged some doubt about investors' willingness to invest in currencies as an asset class. "The size of the retail market is the biggest question."
