Trading relationships in FX derivatives: lessons from Credit Suisse’s collapse

Using granular transaction-level data, this paper investigates the characteristics and implications of dealer-client trading relationships in the over-the-counter FX derivatives market. We first document that dealer-client trading relationships are persistent over time. Then, to shed light on the role of relationship strength for client access to these instruments during times of dealer stress, we examine the collapse of Credit Suisse in March 2023. In this episode, although Credit Suisse’s EURUSD notional traded and trade count declined sharply, clients who had previously relied less heavily on Credit Suisse did not differentially reduce their Credit Suisse-specific trading activity relative to more reliant clients. Instead, clients who had previously relied more heavily on the bank were able to substitute to other existing dealer relationships without incurring additional costs. Overall, these findings suggest that search and bargaining frictions were not particularly costly for heavily reliant clients afte