Banker demonstrates willingness to wear tights to acquire paperweight of glory Yes, dear readers, it is awards season. The time of year when the content of the most ignored slides in pitchbooks is decided upon. Even disclaimers may be read more, if only to discover if the poor, hapless, underslept and under-exercised analyst who wrote it remembered to do a find-and-replace for the previous client to whom the book was presented. It has come to our attention that in this latest round, a couple of banks are taking notably different approaches to the Euromoney FX survey. And of course, we couldn't resist taking a look at the methodology of the thing. First, in the red corner, is JPMorgan! They've taken a position on their high horse with a letter to clients saying that they aren't going to play with the other children this year. Emphasis ours... Alice Ross" FT Alphaville post on the letter has additional context, including the fact that JPMorgan was sixth last year. In the blue corner, a Citi banker! In... tights... That is Bernieman, aka Bernard Sinniah, Citi's global head of foreign-exchange sales. And just look at those quads. Dude works out. Anyhow, all of the fuss led us to wonder about what exactly clients are being asked to do. Is it a big pain or what? Furthermore, how accurate are the rankings that come from such surveys likely to be? Over to Euromoney's methodology: The FX market is an unregulated OTC market and there are no reliable, aggregated, global statistics made available against which to benchmark the survey outside the BIS studies. In other words, other than a rough comparison to BIS statistics, there's no way to know how much (or little) the Euromoney survey is capturing. The survey also excludes a number of categories of market participant, which means that the total volume reported by the survey is not and not intended to be an accurate reflection of total global foreign exchange activity. That's refreshingly honest. Euromoney aims to capture client price-taking activity only. However, given the geographical and participant-type spread represented by the survey, Euromoney believes that the survey provides an accurate proxy for trends in the major areas of activity polled and accurately discerns the relative performance of the banks ranked, particularly over periods of two or more years. Alright, fair enough. It's just what they believe. Argument over. Cough More detail on the quantitative side, even though you now know that it shouldn't be taken too seriously: Overall ranking by market share: Respondents (users of FX services) are asked to give us the volumes transacted with their providers of FX services (in practice this will mean their total FX volume for the year for up to 20 counterparties). Respondents are asked to separate out the volumes transacted with each provider into: Spot/Forward Outright Swaps (single leg) Options (notional value) We imagine that the path of least resistance is for the bank to provide their clients with of all the volume transacted with them, and then just get the client to verify. As one can see in JPMorgan's letter, however, not all clients are even up for that and in any case, a number of them don't take part due to "internal policies and compliance procedures." Of course those internal procedures may include "no wasting any resources whatsoever on helping banks acquire fancy paperweights." At least be reassured that there are certain standards to be adhered to in the quantitative methodology: Additionally, votes are not included in the survey where: FX service providers cast a vote for themselves. Euromoney does not receive confirmation from the respondent of their identity. An individual respondent submits more than one ballot and we cannot resolve the duplication. A respondents volume is duplicating that of a colleagues from the same institution. We receive interbank or interdealer broking volumes. As for the qualitative methodology: This section is concerned with qualitative rankings of various aspects of the FX providers" services. In each category, for example, G10 Currency Research, the ranking is calculated as the arithmetic mean of all the voted ratings (from 1 -7 where 1= very poor 7 = excellent) given to a bank for that category, with any responses that vote 1 in every voted category or which vote 7 in every voted category excluded. Put at least one 2 if voting all 1′s, and one 6 if voting all 7′s. Got it. We're sure all the clients have the exact same understanding of the nuances between a 2 and a 3, a 3 and a 4, and so on, especially when faced with a mere 59 questions in this format, careful and consistent consideration is always given: Note how the above category of qualitative voting only counts for a client's top counterparty. This helps when trying to understand this part of the methodology: To qualify in these categories, banks need to receive 5% of the total individual vote count in that category. Respondents who only respond with a volume figure for one bank in the counterparty section (i.e singlebanked) will not have their ratings included in the qualitative rankings. That's to say that a bank needs to be top ranked by volume by at least five per cent of survey respondents and have the highest arithmetic mean in the above matrix of joy. Put another way, when the final ranking is made, the size of the sample set creating the final score for a given bank may vary wildly. At this point we note the following from the WSJ story that covered Bernieman on Sunday: On Citigroup trading floors, traders, salespeople and analysts have been divided into teams to get out the vote. Instead of their typical uniform of button-down shirts and chinos, employees are wearing T-shirts emblazoned with Formula One racing-team names and Bernieman's motto. Wonder if there's a T-shirt for legacy mortgage products... Don't giggle! This is serious stuff, people. Game faces on now. Related links: Euromoney's 2013 FX Survey - Euromoney (pdf) Citi Crafts Comic Push for Survey's Top Ranking - WSJ Presenting.... the totally exciting Euromoney FX survey 2012 - FT Alphaville Best in Show - FT Alphaville JPMorgan throws itself between survey and clients - FT Alphaville