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Citi European Equities Shows Strength

Wednesday, November 10, 2010

Despite recent efforts by Bank of America(BAC)and JPMorgan Chase(JPM) to expand globally Citigroup(C) remains the most globally diversified of large U.S. "money center" banks.

The latest evidence of Citigroup's foreign prowess comes from its European equities business, which has become a leader in "dark pools"--venues that help large investors trade anonymously.

Citigroup's dark pool, known as "Citi Match," was the leader in September, trading an average of EUR297 million worth of equities daily, according to research from Rosenblatt Securities. That compares to EUR220 million for Credit Suisse's "Crossfinder," which came in second.

Justin Schack, director of market structure analysis at Rosenblatt, cautions that the European data is incomplete, since many banks, including Morgan Stanley (MS)Barclays(BCS), UBS(UBS) and Goldman Sachs(GS), don't disclose trading data for their European dark pools. Nonetheless, Schack believes Citigroup and Credit Suisse are the two largest broker-sponsored European dark pools.

Citigroup's U.S. dark pool doesn't fare nearly as well--coming in 11th place in September, according to Rosenblatt's research.

However, Schack thinks dark pools in Europe have much greater growth potential than those in the U.S. While he estimates dark pools account for 12-13% of U.S. trading volumes, they make up just 2-4% in Europe, where he says they are "a newer phenomenon."

"It's still in the early innings in Europe. A lot of these dark pools are still new and a lot of the growth is ahead of them," Schack says.

While equities trading represents only a small piece of Citigroup's overall revenues, it can also be a factor in whether or not banks win more lucrative underwriting business.

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