In April this year, 53 central banks and monetary authorities participated in the eighth Triennial Central Bank Survey of Foreign Exchange (FX) and Derivatives Market Activity (Triennial Survey). The objective of the survey is to provide the most comprehensive and internationally consistent information on the size and structure of global FX markets, allowing policymakers and market participants to better monitor patterns of activity in the global financial system.
Co-ordinated by the Bank for International Settlements (BIS), participating institutions collect data from some 1,300 reporting dealers on turnover in foreign exchange instruments and over-the-counter (OTC) interest rate derivatives. The triennial survey has been conducted every three years since April 1989, and has been modified since April 1995 to include OTC interest rate derivatives.
Previous Triennial Surveys have used the expression ‘traditional FX markets’ to refer to spot transactions, outright forwards and FX swaps. This expression excludes currency swaps and currency options, which are under OTC instruments. Beginning with the 2010 survey, the expression ‘global FX markets’ will include all five FX instruments.
Turnover on the Global FX Market
- Global FX market turnover was 20% higher in April 2010 than in April 2007, with average daily turnover of US$4.0 trillion compared to US$3.3 trillion.
- The increase was driven by the 48% growth in turnover of spot transactions, which represent 37% of FX market turnover. Spot turnover rose to US$1.5 trillion in April 2010 from US$1.0 trillion in April 2007.
- The increase in turnover of other FX instruments was more modest at 7%, with average daily turnover of US$2.5 trillion in April 2010. Turnover in outright forwards and currency swaps grew strongly. Turnover in FX swaps was flat relative to the previous survey, while trading in currency options decreased.
- As regards counterparties, the higher global FX market turnover is associated with the increased trading activity of ‘other financial institutions’ – a category that includes non-reporting banks, hedge funds, pension funds, mutual funds, insurance companies and central banks, among others. Turnover by this category grew by 42%, increasing to US$1.9 trillion in April 2010 from US$1.3 trillion in April 2007. For the first time, activity of reporting dealers with other financial institutions surpassed inter-dealer transactions (i.e. transactions between reporting dealers).
- FX market activity became more global, with cross-border transactions representing 65% of trading activity in April 2010, while local transactions account for 35%.
- The percentage share of the US dollar has continued its slow decline witnessed since the April 2001 survey, while the euro and the Japanese yen gained relative to April 2007. Among the 10 most actively traded currencies, the Australian and Canadian dollars both increased market share, while the pound sterling and the Swiss franc lost ground. The market share of emerging market currencies increased, with the biggest gains for the Turkish lira and the Korean won.
- The relative ranking of FX trading centres has changed slightly from the previous survey. Banks located in the UK accounted for 36.7%, against 34.6% in 2007, of all foreign exchange market turnover, followed by the US (18%), Japan (6%), Singapore (5%), Switzerland (5%), Hong Kong SAR (5%) and Australia (4%).
Turnover in OTC Interest Rate Derivatives
- Activity in OTC interest rate derivatives grew by 24%, with average daily turnover of US$2.1 trillion in April 2010. Almost all of the increase relative to the last survey was due to the growth of forward rate agreements (FRAs), which increased by 132% to reach US$601bn.