There is something called risk people. Interbank dealers get paid to take risk. If you think it is a money making machine, you are sorely wrong. Sure there are some areas of the business that are just capturing spread, but for the most part there is always a level of risk involved. And its not a license to print money at any time. I traded in some great banks for over 15 years. I have seen people lose a million dollars in a day and their job that same afternoon. The retail business you all are taking part in is a mere spot of a pimple on a boil of the butt of a bank like UBS. I'm not sure about UBS, but other banks I have worked at in the past (Chase, BOA, the old SBC just to name a few) even would set up a "metro" desk just to deal with the small crap from pseudo retail type clients as well as the prices they pump into some online shops. They are dealing day in and day out with hedge funds who are moving anywhere from 5 mio on the low end to 200 mio+ at a clip. I believe EBS is now showing rates in half pips if I am not mistaken, so the market is probably 0.5-2 pips in normal market. You can see choice markets but it is not the norm.
I know the owner of a retail operation. A well known one and he is minting money. Of course, his spreads are 3 pips or slightly under to his customers. I am seeing 1 pip on my screen all day in the Euro ---up to about 14-19 million. For me that is good, I usually trade the CME euro futures though. I can get my price there. At your bank what was the typical spread on a billion Eur/USD (i think they call them yards)?
Im not talking about a retail operation when I said it wasn't a license to print money. Retail operations are indeed a money machine. I mean the interbank/wholesale market. I can't comment on the spread in a yard of EUR/USD since I never had to quote a rate in an amount that large, but we would regularly show 1 or 2 pips max in 100-200, even it was a loss leader just to get the business so another bank wouldn't. Corporate customers are fickle. They will play bank against bank to get the best or should I say most advantageous price, since if you shade them the wrong way, even the tightest spread will cause them to say no thanks.
I hear ya. Thanks for the comments. I have heard you get tight on large size---I am sure there is some finesse involved. Wholesale sounds really competitive anymore. Always was I guess. But anymore you have so many people going after the same thing. Funny, I have seen corporate desks (big 3 auto). I wonder how many think they can trade. They were sitting around big monitors in the treasury department and looked like traders and sounded like traders. Of course they only supposed to be hedgers. They talked alot of BS. Some of the hedges were of course very large.
Alot of those big corporates have serious amounts to move, which in turn can move the spot market, but that is only one portion of what they are doing. Alot of the spot business they transact is the cash portion of an big option strategy.
Are you still at a bank or are you trading for yourself? Forex or something else? Be curious to know what platforms if you are not longer at an insitution. I traffic in Currency futures and have an account I can do cash in. I have found Oanda and IB to be good. Ib is alot better than I expected. Just my opinion.
No I haven't been in a bank since 2002. While I do trade a bit, I would hardly call it a full time job now. I have been trading with Hotspot since I left the banking side and I find them to be very good, much like IB.