JP Morgan Defies All Odds to Dominate Forex with a 10%+ Market Share

Aug 17, 2020

JP Morgan Chase has this year retained the leading position in the forex market, despite concerns surrounding trading liquidity. According to data presented and published by ForexSchoolOnline, the firm exceeded expectations, dominating with a 10.78% market share.

Considering that its market share in 2019 was 9.81%, this was a significant improvement. Notable too is the fact that JP Morgan was well ahead of second-placed UBS, which had 8.13%. XTX and Deutsche Bank took third and fourth positions respectively, and Citi came in a distant fifth.

The situation was vastly different from last year when Deutsche Bank was second with 8.41% and Citi came in third with 7.87%. XTX and UBS had taken the fourth and fifth spots with 7.22% and 6.63% respectively.

Leading Forex Market Share 1JPG

Leading Forex Market Share 2

JP Morgan had at the beginning of 2020 published a report citing potentially low liquidity as the biggest challenge that traders would likely face this year. This was attributed to record low market volatility resulting from an abundance of central bank liquidity in markets worldwide.

However, the same survey also revealed that the trading volume on electronic channels (eFX) would increase from 74% in 2019 up to 84% in 2020. In a bid to keep up with this growing trend of electrification, the firm has in recent times upped the ante on the use of machine learning tools.

In fact, its remarkable performance is likely attributable to, among other factors, its capability in electronic forex trading. Its newest generation of eFX algorithm product is known as the Deep Neural Network for Algo Execution (DNA).

DNA makes use of simulated data from varying market conditions and situations to choose the best execution style and order placement. Its key objective for doing so is to minimize market impact. It then uses a form of machine learning known as reinforcement learning to assess how individual order placement choices perform.

$1+ Billion Ahead of Top Investment Banks Globally

Forex trading is by no means the only feather on JP Morgan’s cap. In fact, JP Morgan also happens to be the leading bank investment bank worldwide, both in terms of market share and revenue. 

In 2019, the firm took the lead globally among investment banks in terms of revenue from investment banking. Reported data shows that its total revenue for the period was $6.89 billion. Goldman Sachs came in second with $5.83 billion while Morgan Stanley had $4.77 billion. During the same period, BofA Securities (previously Bank of America Merrill Lynch) generated approximately $4.72 billion.

Largest Bank Globally
 

All four market leaders happen to be American multinational investment banking firms. As of July 2019, these four held over 25% of the global market share in investment banking. It comes as no surprise since at least half the investment banking fees in 2015 came from the Americans.

JP Morgan also took the lead in the global market share of revenue of leading investment banks as of July 2020. According to a report published by Dealogic.com, it had a 9.6% market share, while Goldman Sachs came in second with 8.4%. Bank of America Securities was third with 7.2% while Morgan Stanley and Citi took fourth and fifth place with 6.4% and 5.8% respectively.

Notably, JP Morgan Chase was the top investment bank in the world in 2019 too, with 8.9% in terms of the total revenue generated. Following not too far behind was Goldman Sachs at 7.5%. This upside momentum came as a surprise considering the fact that lower US interest rates had been expected to impact profitability negatively.

At the end of the fourth quarter of 2019 when the firm published its profit and revenue reports, the results were far above analyst estimates. Revenue was up 9% and while estimates had placed it at $27.94 billion, it ended up hitting $29.2 billion.

Leading Banks Globally with a Margin of Over $100 Billion in Market Cap

Another area of excellence for JP Morgan is its market capitalization. Research published by Banksdaily in July 2020 pits the bank over $100 billion ahead of the rest with a market cap of $433.5 billion. Sitting in second spot is Bank of America with $306.7 billion and ICBC took third place with $290 billion. 

Largest Bank on Market Capitalization 

Also referred to as stock market value, market capitalization refers to the total value of the shares issued by a publicly-traded company. It amounts to the price of a single share multiplied by the total number of outstanding shares. It is thus a reliable proxy for the public perception of the net worth of a company. And as such, it is considered a key determining factor in the calculation of other theoretical values of a company.

The only key area that seems to have escaped JP Morgan’s domination is wealth management. In this category, Bank of America GWM takes the lead with assets worth $1.85 trillion under its management. Morgan Stanley Wealth Management is second with $1.26 trillion while JP Morgan Private Bank is in the third spot with $774 billion.

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