Life on the London trading floor at Citigroup



The epicentre of the investment bank is, of course, still the trading floor. This is the battleground where traders and salesmen and women return every day armed only with strong coffee, the Financial Times and the latest batch of analyst notes, to pit their skill and intellect against the capricious nemesis that are the financial markets – and hopefully win.

Just at Citigroup’s London HQ, you will find more than 1,000 of these men and women working for the bank’s EMEA Markets and Securities Services (MSS) division which includes rates, commodities, credit, FX, equities, and investor services. All of the heads of division sit in London, except for credit, who based in New York.

They sit across two expansive floors, with FX and rate traders and salespeople on one floor and credit and equities sitting cheek-to-cheek on the other. They work only for the bank’s institutional client base. Citigroup never had a proprietary trading desk in the same way as some of the other investment banks and so the commodity desk is less affected by the Volcker Rule than other banks.

The boss of the division is Leonardo “call me Leo” Arduini, a Citigroup veteran who took over the role in March 2014 after being promoted from his previous position as head of EMEA investor sales. He has been with the bank for 21 years, covering many trading, sales and management roles.

He became head of markets in Italy in 2010 and since then his career has been on the rise, clearly proving his salt in a challenging period. It certainly hasn’t gotten easier since he took the helm of EMEA Markets with heightened volatility in most financial markets, a result of geopolitical and economic uncertainty for the best part of 2015.

In the bank’s third quarter until the end of September, Citigroup’s Markets division suffered an overall year-on-year 5% dip in revenue, with fixed income dragging on performance, down 16% to $2.6 billion from $3.06 billion in the same period in 2014.

In addition, there has been the delicate matter of a global regulatory investigation into widespread foreign exchange rate manipulation, which Citigroup has been cooperating with.

But challenging environments have become the new normal for banks and time will tell if Mr Arduini is up to the job to steer the US bank’s key EMEA trading operations in the right direction.

A tour of Citigroup’s trading floors proves slightly disappointing for your correspondent, but not unexpected. No excitable and cryptic hand signals to execute a trade and no adrenaline-fuelled shouts of “buy” and “sell”.

There are lots of screens with fast-moving red and green lines, but traders go about their business quietly and the only sounds are the low hum of the air conditioner and snippets of conversation.

For a long time, the business of trading most markets – with the exception of the commodities exchange in Chicago – has not been a spectator sport, but there is an intense energy on these floors and the sense that there is a lot riding on the minute-by-minute actions of the people that work here.

The trading floor is not like it was 20 years ago, and with less liquidity because of a number of factors such as higher capital requirements, it is also much more difficult for a bank to make money,” says one insider. “Citigroup is in good shape because it has been hugely slimmed down after the crisis, but hasn’t pulled out of any markets or geographies as our competitors have.

“Take, for example, credit default swaps, worth billions of dollars before contributing to the financial meltdown of 2007-2008. But we didn’t withdraw from the market because that’s not what you do when you want to provide a holistic service to clients.

“Demand has picked up for credit default swaps for those who have been exposed to Glencore and Volkswagen and we have been here to offer that service,” the insider said.

Vital stats

1) Fixed Income, Currency and Commodities (FICC)

Global volume traded: USD$5 trillion per day in FX, not all of FICC
Share of market: 16% (Citigroup and Deutsche Bank handle a third of the global currency market)
Global Head of FX and Local Markets: Nadir Mahmud, previously regional markets head for Asia-Pacific, responsible for all markets businesses in the region.
Interesting fact: Citi is the largest global FX house.

2) Commodities

Global revenues: Around $5 billion per annum
Share of market: Top 4 globally, with an 11% market share worldwide
Head of Global Commodities: Stuart Staley, a former vice president at Enron Europe, hired in 2010 to oversee a massive expansion of Citigroup’s commodities business and integrate it with its global banking franchise.
Interesting fact: Citi Commodity revenues increased 103% in 2014.

3) Equities

Revenues: $2.78 billion in 2014
Head of equities: Derek Bandeen, the ex-Morgan Stanley veteran hired in 2008 to build Citi’s global equities business. The equities division was a bright spot in the bank’s third-quarter earnings report, with revenues up 12% from the prior year period driven by growth in derivatives.
Citi recently made a number of senior hires in the equities space including Murray Roos (joining from Deutsche Bank) as global head of sales for equities and prime finance, Stephen Roti (joining from Nomura) as global head of corporate equity derivatives and John Lowrey (former Chi-X CEO) as global head of cash electronic execution

4) Fixed Income

Share of market: Top 3 in EMEA after Goldman Sachs and JP Morgan

5) Investor Services

Head of Investor Services: Okan Pekin, a Citi veteran, previously Global Head of Institutional FX & Local Markets and Head of CEEMEA Sales.
Citi’s Investor Services business unit was created in late 2013 to provides fund managers with access to an end-to-end set of investment solutions across Prime Finance and Agency Securities Lending, Futures, OTC Clearing and Collateral Management, Custody and Fund Services.
In 2014, Citi was awarded a mandate from Norges Bank Investment Management (“NBIM”), the organization responsible for managing the Government Pension Fund Global, to provide global custody and securities lending services to support NBIM’s $850 billion investment portfolio globally. The mandate is believed to be one of the largest of its kind in the industry.

6) Global Interest Rates

Head of Global Interest Rates: Andrew Morton, who was snapped up weeks after he quit Lehman Brothers in September 2008, just before the US bank filed for bankruptcy. A Canadian academic with a huge reputation in fixed income and co-author of a series of papers on a methodology behind the pricing fixed income products in the late 1980s, still widely used by banks and institutional investors today.

This story first appeared in FinBuzz.


Photo: Tjeerd Wiersma