CitiFx Forex Broker Review

CitiFx (Pro), a Forex Brokerage Service, by Citibank and Saxo Bank of Denmark

Year founded: 2007
Locations: New York
Average Spread: 2-4 pips
Minimum account size: $10,000
Leverage: 50:1
Accepts US clients: yes
Regulated by: Federal Reserve, OCC
Dealing desk: yes

Broker Overview

CitiFx, an extension of Citi’s forex institution brokerage service, launched in November 2007 in cooperation with Saxo Bank of Denmark, an online bank and a long-time online forex trading provider and a global leader based in Copenhagen, is designed to offer sophisticated individual traders and small institutions the access to the same level of data and trading technology only available to large institutional traders before. Citi had long served the traditional forex market of large institutions and the move to extend its reach to the growing market of active individual and small institution traders is both strategic and natural in terms of leveraging its existing global forex product suite and expanding client base into this emerging client segment.

CitiFx is a U.S. based operation, but also live in Asian markets, as we as available in other selected countries. Trading through CitiFx is totally online, with one platform that comes with three ways, CitiFx Desktop, Web Base, and Mobile Phone. CitiFx has incorporated into its trading platform the popular MetaTader (4) trading interface, which includes technical analysis, charting, and expert advisor programs used to interact with trading actions. Saxo Bank, a pioneer and foremost provider of online forex trading and best know for its SaxoTrader trading platform, brings to the partnership its user-friendly online trading technology and best of class facilitation of product and service delivery. Adapted from Saxo Trader, CitiFx is developed specifically for Citi based on its specifications given its world class product infrastructure. Combining Citi’s global presence in the forex market with Saxo’s proven abilities in online trading support, CitiFx aims at providing both Citi’s better prices and liquidity and Saxo’s tested products and services to a growing audience seeking to trade in the margin forex space.

Trading Conditions

Dealing Desk

As a large, international bank participating in the forex market, Citi runs an active forex trading on its own behalf. While not promising its dealing desk will be free of making any unintentional trades against its customers, CitiFx is committed to following fair trading practices. But sometimes when a dealing desk has information about both its trading positions and the customers’, its trading programs may automatically spike rates a few pips in the broker’s favor, especially when indiscriminately processing order information coming in from both customers and other market counterparts. The accumulation of a few pips in trade execution difference could mean serious profits for a broker and losses for customers. Hopefully, the NFA (National Futures Association) will start documenting the practice and more dealing-desk brokers will make clear distinctions between making their own trades and handling customers’ trades. Moreover, given Citi as a regulated bank with layered audits and compliances, traders should have more confidence that CitiFx will make efforts on fair dealing with its own customers.

Spreads

CitiFx has an average of 2-4 pips for its target bid/ask spreads under normal, non-volatile market conditions on the most actively traded currency pairs. On some less traded and much lower-valued currencies, the spreads can be wildly wide, as high as over 300 basic points (300 pips), such as the 360 target spread for Euro and Russian Ruble. And it’s not unusual to see spreads set around 100 pips for quite some other currency pairs either, for example a spread of 100 pips for U.S. Dollar and Norwegian Krone and 95 for Euro and South African Rand.

So far perceptions about how competitive and liquid CitiFx’s spread pricing is has been mixed. But CitiFx maintains that it can live up to its target spreads as advertised unlike some other brokers that may loosen their tight pricing when executing in live market conditions. Moreover, CitiFx may be able to set narrower spreads for some customers based on their trading volume. Theoretically, customers should be afforded a spread advantage by dealing with a bank that is a direct participant in the underlying interbank forex market. Independent forex brokers that receive their prices from banks and transmit them to clients add another layer of bid/ask spread. It’s the same principle as partly used when choosing a stock broker. Investors get a more competitive pricing from a stock broker that is also a market maker inside the exchanges for certain securities.

Leverage, Account Types, and Number of Currency Pairs

Credit provided by CitiFx to customers has a maximum limit of 50:1 leverage, i.e. 50 times the account equity value, which is definitely not among the highest even when compared to some smaller independent brokers. However, a new rule proposed by CFTC in January this year will try to limit the leverage to only 10:1. The maximum leverage becomes a nominal figure when reduced to arrive at the true or used leverage if one wants to leave enough margin of safety by not taking up all the leverage allowed. In addition, different margins are set for different currency pairs based on how volatile they are. At CitiFx, leverage can go as low as only 12.5:1 with 8% margin on some currency pairs. A leverage of 25:1 with 4% margin is not uncommon even on a few familiar currencies, most noticeably Mexican Peso.

CitiFx offers a total of 138 currency pairs available for trading, which are among the widest set of tradable currencies currently available with any provider, backed by the bank’s vast exposure to currency markets trading worldwide, including some emerging market currencies that other brokers do not allow. Beginners in currency trading may not even recognize the currency codes for some less known currencies. CitiFx is intended for advanced traders and institutions and not a place for forex beginners to practice. And as such, the service does not have a trial or practice account using virtual money as offered by many other brokerages. For anyone new to trading and looking to start small, CitiFx is not an ideal place, as it doesn’t have a mini account. Its standard, regular account requires a minimum deposit of $10,000, a large sum and among the highest required of a forex account holder by brokers, given that a couple of hundred dollars can open an account with some smaller brokers or even a nominal $1 in rare cases. Such a large account size further demonstrates that CitiFx is only for experienced traders.

Education

Some may consider education resources at CitiFx as lacking, but its trading software is to challenge users of advanced levels and not for beginners. CitiFx does not provide basic, entry-level education mostly needed by beginning users, because its trading platform is designed with the high-end traders in mind. Site tutorials are available as guides for account set up. Customers are expected to overcome the software learning curve themselves with the help of a free demo account. But be aware of the expiration date on the demo account, as it may not be available when needed for later uses.

On the other hand however, CitiFx provides clients access to the most cutting-edge research analysis and market commentary backed by Citi’s massive operational structures. Information about developments in the currency and other related markets and the economic events behind them is being streamed 24 hours directly onto the trading platform to allow traders to make the most informed trading decisions in real time.

Customer Support

Customer service at CitiFx is considered a major advantage by both many users and the company itself. CitiFx offers during the 5 trading days a 24-hour customer service via telephone on both trading and administrative needs, though there is no online live chat unless you have an instant messenger account already set up. Email support is also available with a response time within 24 hours and the old-fashioned fax is still in use. All in all, users of CitiFx can expect excellent customer service simply because of the size and history of the parent company that runs it.

Safety

In the U.S., forex markets and brokers are regulated by CFTC (Commodity Futures Trading Commission) and NFA (National Futures Association), an industry self-regulatory organization, which requires mandatory membership of all forex brokers. Retail forex trading and online brokerage service are of special attention to forex regulators. Regulated by the Federal Reserve and the OCC (Office of the Comptroller of the Currency), Citibank is in a better position to ensure regulatory compliance at CitiFx, especially when it comes to maintaining a sufficient amount of funds to meet their customers’ needs. Excess capital concerns about CitiFx, if any, should be rightly addressed by the full backing of its parent bank.

Brokers can go bankrupt from time to time, not by servicing customers and collecting commissions but when they start trading the market themselves by becoming dealers. The failures of Bear Stearns and Lehman Brothers make such a proposition unarguable. Therefore, customers do risk losing deposits they place with their forex brokers. As a FDIC insured bank, Citi offers the same level of FDIC deposit insurance on funds under a CitiFx U.S. dollar account, which is currently at $250,000 per account holder until December 31, 20013 and $100,000 thereafter.