1. Business Briefing Session Fixed Income/Foreign Exchange
Victoria Taylor, Corporate FX Sales

2. Where does FI/FX fit in to Citigroup?
Global
Consumer
Global Corporate
& Investment Bank
Private Client
Services
Cards
Consumer Finance
Retail Banking
Corporate Banking (GRB) *
Transactional Services *
Global Equities *
Global Investment Banking *
Global Research
Global Fixed Income
Life Insurance
PBG
Asset Management
Investment Advice
Financial Planning
Brokerage
Global Rates & Currency
Credit Products
Futures
Securitization
Treasury
FI Sales & Research
NSSB
Global Investment Mgt.
& Private Banking

3. Citigroup Foreign Exchange
CitiFX is the largest foreign exchange institution in the world
CitiFX handles approximately 10% of the world’s total FX market volume
CitiFX offers its services to over 1,900 customers globally with a presence in over 100 countries
CitiFX has over 325 foreign exchange professionals providing 24 hour global coverage
CitiFX offers in-depth research, analytical tools and execution through both traditional and e-channels

4. The FX Market FX Market is the largest financial market in the world
Operates globally, 24 hours a day, 6 days a week
$1.1 Trillion turnover a day. By comparison, London Stock Exchange’s average daily turnover is approximately $20 billion
Highly Liquid
Highly Transparent
Highly Efficient

5. Factors affecting the market
Technical
Fundamental
Expectation
Interventions
Economic
Political
Psychological
Events
Market

6. Market Dynamics – The Players
Speculators
Bank
Corporates
Brokers
Bank
Bank
Bank
Central Banks
Investors

7. FX Trading Floor Sales Teams Trading Desks Research Teams Corporate
Investor
Leveraged investor
Banks & Central Banks
Trading Desks
Spot or cash trading
STIRT (Short Term Interest Rate Trading)
Options/Derivatives
Proprietary trading
Emerging Markets
Research Teams
Economics/Fundamentals
Technicals
Flows

8. What does a Sales job involve?
Managing Client relationships
Market updates
Providing Trade/Hedging ideas to suit customer’s needs
Differentiate yourself from the competition
Position yourself to be the number 1 FX provider

9. Customer’s FX needs Corporates Leveraged investors Investors
Day to day business operations outside functional ccy
Hedging FX exposure to minimise the effects of adverse exchange rate movements
Leveraged investors
Speculative - FX now perceived as an asset class in its own right
Investors
Some speculative activity
Managing the FX transactions generated by fixed income and equity trading
Central Banks
Stabilise exchange rates - either Support or Suppress
Foreign Reserves Management
E.g China

10. Example: UK Airline Corporate customer
Multinational business with operations (revenues/costs) and assets/ liabilities denominated in numerous foreign currencies
Hence, exposure to both Transactional and Translational FX risk
Transaction risk comprises commercial flows in foreign currency (costs and revenues) so earnings are affected when exchange rates fluctuate
Translation risk comprises the translation effects on balance sheet items such as assets and liabilities in foreign currency due to changes in exchange rates

11. Example: UK Airline
Primary exposure is to movements in GBPUSD as Fuel costs and Aircraft leases denominated in dollars
xxx, therefore, have in effect a long sterling position, resulting in their earnings being adversely affected by a depreciation of sterling against the dollar
e.g. xxx have $100,000,000 dollar fuel costs payable in three months
Therefore, in three months xxx must sell GBP / buy USD to pay the dollar denominated fuel costs
xxx are exposed to GBPUSD movements since a sterling depreciation will have the effect of increasing their costs in sterling, their functional currency

12. To hedge or not to hedge
Remain Unhedged - Sell GBP at the prevailing CABLE exchange rate, three months from now, leaving them exposed to movements during that time
In the last 3 months GBP required to buy $100,000,000 has been between £52.4 million and £56.5 million. Fuel costs could fluctuate by £4.1 million in a 3 month period
b) Hedge their Exposure - hedging is the process of implementing protection for a present or future position which has exposure to market price fluctuations
This involves locking in a forward FX rate today that will enable them to buy USD at a known rate in 3 months time

13. What does a trader do?
Market making to Sales desks, brokers and other banks
Book running
A trader takes different proprietary positions:
Directional trades, i.e. long or short the market outright
Differential trades, i.e. difference between interest rates in two different currencies
Relative Value trades, i.e. trades where the 6 year price looks wrong given where 5 and 7 years trades

14. Trading Principles Position Taking Position Long Short
Traders may buy and sell currencies to generate a position (either long or short respectively) based upon a certain view that the trader possesses.
Position
Long
Short
If the base currency
appreciates the position
will yield a PROFIT
depreciates the position

15. Position Taking The trader may either:
allow a position created from a customer transaction to run i.e. the trader will not immediately cover the position
ask another bank for a price and hit it on the desired side to cover his position
e.g. A customer sells $5m USDJPY at to a spot trader. The
trader who believes the USD will appreciate will allow the position to run.
If USDJPY appreciates to the trader has made 59 pips of
profit on $5 million. USD Profit equals (0.59 * 5m)/120.0 = $24,583.33

16. Role of a Structurer? Works between the trader and the sales person
Identify new solutions for clients
Considers relative merits of different instruments given market conditions and objectives
Checks component prices so that he can revert back to the sales person with the overall price and the characteristics of what is going to be marketed to the client
Always thinks about new ideas that “exploit” current market conditions and/or help to achieve the clients goals
Peer analysis, what are similar sectors looking at?

17. How the market moves? US employment data
EURUSD moved sharply higher after soft US employment data on Friday
EURUSD rallied from

18. How the market moves? BoE rate hike
Bank of England surprise 25b rate hike
GBPUSD moves from

19. China- Pegged Currency
In 1994 China devalued its currency and was pegged to the USD within a band until last year. Now a ‘crawling peg’. CNY can only appreciate within a defined band each day.
US calling for quicker appreciation of CNY

20. ADDITIONAL INFORMATION AVAILABLE UPON REQUEST
This document does not represent an accounting opinion. The Company should consult with their auditing firm for further accounting opinion on the proposed transactions.
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST
Citibank, N.A., London Branch and Citigroup Global Markets Inc, including their parent, subsidiaries and/or affiliates (“the Firm”), may make a market in the securities discussed in this report and may sell to or buy from customers, as principal, securities recommended in this report. The Firm may have a position in securities or options of any issuer recommended in this report. An employee of the Firm may be a director of an issuer recommended in this report. The Firm may perform or solicit investment banking or other services from any issuer recommended in this report.
Although information has been obtained from and is based upon sources the Firm believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the Firm 's judgement as of the date of the report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security.
This report is distributed in the United Kingdom by Citibank, N.A., London Branch or Citigroup Global Markets Limited, Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, UK. This material is directed exclusively at market professional and institutional investor customers and is not for distribution to private customers, as defined by the rules of the Financial Services Authority, who should not rely on this material. Moreover, any investment or service to which the material may relate will not be made available to such private customers. This material may relate to investments or services of a person outside of the United Kingdom or to other matters which are not regulated by the Financial Services Authority and further details as to where this may be the case are available upon request in respect of this material. If this publication is being made available in certain provinces of Canada by Citigroup Global Markets (Canada) Inc. ("CGMI Canada"), CGMI Canada has approved this publication. This report was prepared by CGMI and distributed in Japan by Nikko Citigroup Limited, it is being so distributed under license. This report is made available in Australia through Citigroup Global Markets Australia Pty Limited (ABN ), a Licensed Securities Dealer, and in New Zealand through Citigroup Global Markets New Zealand Limited , a member firm of the New Zealand Stock Exchange. This report does not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision. Citigroup Global Markets (Pty) Limited is incorporated in the Republic of South Africa (company registration number 2000/025866/07) and its registered office is at Citibank Plaza, 145 West Street , Sandown, Sandton, 2196, Republic of South Africa. The investments and services contained herein are not available to private customers in South Africa. This publication is made available in Singapore through Citigroup Global Markets Singapore Holdings Pte Ltd, a licensed Dealer and Investment Advisor.
Citigroup Global Markets Inc. is a member of the Securities Investor Protection Corporation (SIPC). © Citigroup Global Markets Inc., All rights reserved. Smith Barney is a division and service mark of Citigroup Global Markets Inc. and its affiliates and is used and registered throughout the world. Citigroup and the Umbrella Device are trademarks and service marks of Citicorp and its affiliates and are used and registered throughout the world. CitiFX  is a service mark of Citicorp, Inc. Nikko is a service mark of Nikko Cordial Corporation. Any unauthorized use, duplication or disclosure is prohibited by law and may result in prosecution.
Issued by Citibank N.A., London Branch is regulated by the UK Financial Services Authority
33 Canada Square
Canary Wharf
London E14 5LB