Three months into a program to expand its foreign exchange trading business with regional banks, Chase Manhattan Bank has declared the plan a success.

By dedicating three traders to the market, the Chase Manhattan Corp. subsidiary has seen its monthly trading volume with medium-size banks increase ten-fold, to about $1 billion, bank officials said. Chase is doing business with about 65 regional banks.

To spur banks to call it for currency trading, Chase now hooks the regionals directly into its traders' early morning strategy meetings.

Few Follow Chase's Example

Although almost all large banks offer foreign exchange services to regional banks, few have specially designated traders to deal solely with them.

Chase's program has been so successful that the bank plans to open a four-trader currency desk in London next month that will focus on regional banks in Europe.

The increased business is less than 1% of Chase's average daily foregin exchange volume, but executives said the market has significant growth potential.

"We can offer very competitive pricing," said James P. Borden, senior vice president and head of the North American foreign exchange group. "Regional banks are a very large potential business base for us."

Chase also sees currency trading as an effective adjunct to its traditional correspondent banking services, such as cash management, executives said.

Analysts don't expect the new trading desks to increase the parent's profits substantially, but they applaud the marketing savvy that it denotes.

"It may increase profits in small increments," said John Leonard, an analyst at Salomon Brothers Inc. "It reinforces Chase's strong customer orientation and will give a little extra tie-in for the correspondent business."

The service is part of a larger effort at Chase to increase profits from foreign exchange trading. The bank booked $124 million of currency trading profits in the first half of this year, up 13% from the same period in 1991.

Joint Venture in Derivatives

Earlier this year, Chase formed a joint venture with Susquehanna Partners, a group of successful Philadelphia options traders who are developing a derivative trading system and new products for the bank in a profit-sharing venture.

Mr. Borden said the bank expects to have its trading systems linked to Susquehanna's by fall.

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