UBS: an FX beacon in a sea of doubt

UBS practically swept the leader board in the currency category of FX Week sister publication Risk 's 2008 interdealer survey released last week.

The bank topped 14 out of the 23 currency categories - 10 wins ahead of second place winner the Royal Bank of Scotland - demonstrating that it continues to be a foreign exchange power house.

The past year's turbulent market conditions have cut across all derivatives markets, with FX options being no exception (page 2). In an interview with Risk, Fabian Shey, global co-head, forex and money markets at UBS in London said liquidity has dried up in the derivatives market over recent months. He said more and more banks are declining to quote in forex options, but added that there has also been a lot of client interest. "In our role as a bank market maker, things have become a little tougher because the liquidity has dried up to a certain extent and banks are declining to quote," he said.

He did however add that as forex is not an inventory business, it tends, as a result, to benefit from market crises and market volatility, as that increases client interest in it. "Banks with a client-driven forex business model will have benefited as long as they have the market-making franchise that can withstand this level of dislocation, uncertainty and volatility."

It should be interesting to see how the past 12 months have affected the leader board of the annual FX Week Best Bank survey, which concluded last Friday. Results will be announced at the awards dinner in London on November 18.

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