A world-class team, decades of dedication to the market and unparalleled coverage across different products all helped put Citi ahead of its competitors in 2022. The firm has taken home well-deserved awards for credit derivatives in the Americas, Europe, and Asia, as well as interest rate derivatives in the Americas.
Citi has been a major player in the Americas derivatives space since that market’s inception in the early 2000s. From liquid credit indices and credit default swaps to bespoke and exotic structures, the firm looks at the entire spectrum of credit derivatives. “Throughout the last decade running a full, comprehensive credit platform has been a core part of our strategy,” says Vikram Prasad, Global Head of Credit and Municipal Trading. “If you don't offer the complete product suite you miss out on a big portion of the relative value that is important to clients and you miss a lot of the flows.”
The bank’s consistent commitment to the market has seen Citi stand stalwart through all the major periods of crisis and market stress over the last two decades. In turn, that commitment has been valuable in helping attract clients in need of market expertise and insight. Citi’s involvement in every part of the derivative ecosystem gives the firm’s market makers an unrivalled perspective into market trends.
Citi’s clients have a broad range of needs that span various different products. “Our clients are sophisticated, and they're constantly evaluating which of these instruments really meets their needs,” says Prasad. Whether those needs involve expressing a quick local market view using liquid credit indices, or hedging a position through individual CDS, Citi tailors its support to suit all situations. “For us, it’s about helping clients address the objectives they're trying to solve for,” he says.
A strong foundation in risk management and a strong culture built around the credit derivative universe are part of Citi’s success. The teams working to provide clients with peerless insight and support have been working in concert for decades. “The team that Citi has is one that has been together for a very long time,” he says. “Davy Kim runs the business in the US and we've got Alexis Sereo who runs the business in Europe - both have been at Citi for more than 10 years. Index options traders, our CDS traders, they've all been here for a long time.”
The firm has remained strong with its traditional real money client base, but its expertise has also positioned it to capture flows from emerging sources of demand. This includes a major rise in hedge fund money flowing into the credit derivative space. Multi-strategy funds - including macro and systemic funds - previously not involved in the credit markets have entered in recent years. Understandably, Citi is the bank of choice. So far in 2023, the bank is seeing activity surge, as a volatile macro environment and interest rate uncertainty fuel the need for repositioning.
In retaining a dominant position in the derivatives space, Citi places huge importance on client feedback as an indication of its performance. “Across our clients we are generally either number one or very close in almost every part of the credit derivative ecosystem,” says Prasad. “Whether it's our European index trading business, our global index options business or the bespoke tranche trading business.”
Far from reacting only to the current market environment, Citi also stands out for its foresight. The firm is always looking to the next evolution of the credit derivative business. This includes adapting to higher correlation between the credit derivative and the corporate bond ETF landscapes. “One of the things that we have strategically done within our business is put together the credit derivative business and our fixed income ETF business,” says Davy Kim, Co-Head of Synthetic Structured Credit Trading. “We're treating them as a business that needs to operate with real coordination in order to provide our clients with the best liquidity and risk management.”