Following what remains to some a surprisingly strong number from the Bank for International Settlements’ Triennial Survey of FX Turnover in April 2019, the latest semi-annual reports from seven of the world’s FX committees indicates that turnover increased again in October 2019. The UK and Canada hit new peaks for FX turnover in the month, while all centres were up from the BIS data except for Singapore and Hong Kong, which showed a decline. On a year-on-year basis, all centres had increased turnover save for the US.

The UK’s FX Joint Standing Committee (JSC) survey shows that turnover in the world’s largest FX centre was $2.881 trillion per day, extending what was April 2019’s new record by just under 1% and a 10.3% year-on-year. The growth was entirely in non-spot products with FX swaps and outright forwards both hitting new high water marks.

Spot activity actually declined by 4.4% from April (-1.8% year-on-year) to $754 billion per day. FX swaps remain the powerhouse of the UK market, hitting $1.49 trillion per day in October, a 3.2% increase from April and a large 25.3% rise year-on-year. Elsewhere, outright forward trading rose, while NDF volumes pulled back from April’s high – currency swaps activity increased, while FX options turnover dropped. In outrights, turnover hit $311 billion per day, a 10.3% increase from April and up 16% year-on-year. NDF activity fell back for the first time in quite a while in the UK survey; the JSC says daily turnover was $132 billion, up 10.9% from April, but down 5% year-on-year.

The decline in NDF activity means that FX options retains its spot as the fourth biggest product set in the UK FX market; activity was $148 billion per day in October, a decline of 6.3% from April and of 5.1% from the previous October. Elsewhere in FX derivatives, currency swaps volume rose to $42 billion per day from $26 billion in April and $31 billion in October 2018.

In the US, the New York Foreign Exchange Committee (FXC) says that daily turnover was $889.3 billion in October 2019, a 9.7% increase from April, but a 10.7% decline from the previous October. On an annual basis all product sets saw a decline except for FX options, however all products were higher compared to April’s survey.

Spot turnover remains well off the peaks of 2014-15 in New York at $358.3 billion, and while this is a 12.2% increase from April, it is a sizeable 21% lower year-on-year. Outright forward turnover was $192.9 billion in the latest survey, a 7.5% increase from April, but a 6.8% decline year-on-year, while NDF activity also climbed from April, by 14% to $49.7 billion, however this was a 1.2% decline from the previous October. FX swaps turnover was up 6.9% year-on-year to $277.4 billion, this is very slightly lower than April, but to all intents and purposes, unchanged, while FX options turnover was $60.7 billion, a 14.8% increase from the previous October and also up 6.2% on April’s data.

Singapore and Hong Kong are the only centres to report a decline in activity from the BIS month of April 2019. In October, the city-state handled $548 billion per day, a 6.4% decline – activity was up, however, on a year-on-year basis, by 8% and it was a similar picture in Hong Kong where turnover was $567.9 billion, down 10.1% from April’s huge $632.1 billion reading, but up 20.6% year-on-year.

Spot turnover in Singapore was $84.8 billion, a huge 23.8% decline from April and down 9.7% from the previous October. Elsewhere, outright forwards activity was $71.2 billion per day, a 9.3% fall from April and down 3.6% year-on-year, while even FX swaps – long a strong suit in the Singapore market – saw activity decline by 4.6% from April to $263.2 billion in October, this was, however, a 16.6% increase from the previous October.

Generally speaking, in Singapore the size of the fall in activity was diminished by a surge in activity in currency swaps – not the first time this has been seen in the local FX committee data. Turnover was $100.8 billion in October 2019, up 12% from April and up a huge 28.4% year-on-year. FX options activity largely reflected that in spot, falling to $27.7 billion in October from $30 billion in April and $35.4 billion the previous October.

In Hong Kong, activity was again led by FX swaps at $385.3 billion per day, a 7.6% fall from April, but up 31.1% from October 2018. Elsewhere, spot activity was $79.3 billion, down 29% from April and 12.9% from October 2018, while outright forwards surged to a new high of $61.2 billion from $58.6 billion in April and $44.9 billion the year before. FX options activity fell away in Hong Kong, to $15.5 billion in the latest survey from the Treasury Markets Association, from $22.9 billion in April and $23.4 billion in October 2018.

In Japan, the Tokyo Foreign Exchange Committee (TFXC) says turnover hit $408.4 billion in October, only the third time the centre has exceeded $400 billion and the second highest to date.

Spot turnover was $129.7 billion, 7.1% higher than April, but down 3.5% from the previous October. Outright forward activity actually declined to $55.2 billion, a 10.1% decline from April, but 15.2% higher than the year before, while FX swaps activity was $209.6 billion, a 3.7% increase from April and 2.7% up year-on-year.

Currency swap activity was higher at $5.8 billion, up from $4.5 billion in April and $5 billion in October 2018, while FX option turnover declined to $8.2 billion from $9.7 billion in the two previous surveys.

In Japan, electronic trading by financial institutions hit a new high at $160.5 billion, or 51.8% of all trading by this segment – the first time it has risen above 50% since the survey started. The electronic trading data with non-financial customers also hit a new high for the survey at $64.9 billion, or 65.7% of all that segment’s business.

Meanwhile in Australia, turnover rose to $139.4 billion per day, the highest level since October 2014. Spot activity was 17.3% higher than in April at $39.1 billion per day, however it was unchanged year-on-year, and there were also strong increases in outright forward turnover at $16.6 billion (up 10% from April and a massive 39.9% year-on-year), as well as in FX swaps at $79.4 billion (up 22% and 32.5%, respectively).

The only decline in the Australian data was in OTC FX options, which declined to $1.06 billion per day from $1.6 billion in April and $1.3 billion in October 2018. Currency swaps activity fell to $3.3 billion per day from April’s $4.1 billion, however it was significantly higher than October 2019’s $2.1 billion.

Finally, Canada joined the UK in setting a new high for turnover in the centre, the local FX committee reporting $139.9 billion per day of FX activity, representing two hugely impressive gains of 32.2% from April and 37% year-on-year. All products were higher, but the heavy lifting was done by FX swaps, which rose by 42% from April (which was itself a new high for the product in Canada) to $96.1 billion per day. This is a 51.3% increase from the previous October and almost two and a half times what activity was just four years previously.

Spot turnover in Canada rose to $20.5 billion in October from $17 billion in April and $18.1 billion the year before, while outright forward turnover was $14 billion, up from $12.5 billion in the two previous surveys. FX options also got a boost – averaging $4.6 billion per day from $4 billion in April and $3.4 billion in October 2018, while currency swaps activity was $4.7 billion, a slight increase from the $4.6 billion in the previous two surveys.

Overall, the data indicates the FX market, especially in non-spot products, shows no signs of slowing down after what was a hugely impressive BIS number in September. There are potential worries for those dedicated to the spot business, the continued period of low volatility is seeping through into the spot data, however for a well-balanced FX business the news is nothing but positive.

Colin Lambert

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