The FX market has a new benchmark until 2019 - and it's $5.1 trillion.
So the latest Bank for International Settlements (BIS) Triennial Central Bank Survey is out and, as Profit & Loss previously reported, the headline figure is that the FX market has contracted in size from $5.3 trillion to $5.1 trillion traded per day over the past three years.
This news seems to have caught very few people by surprise, however the survey shows spot foreign exchange volumes are lower while FX swaps activity has grown considerably, especially in Asian centres and in the yen.
Data from the world’s FX committees reinforces the sense that April was a minor outlier in FX turnover, with all but one centre reporting a slowdown in activity from April 2016 to October 2016.
In April 2016 – coincidentally the month of the Bank for International Settlements’ (BIS) Triennial Survey of FX Turnover – there was a late spike in activity as the Bank of Japan surprised markets through its inactivity on monetary policy, leading to yen volumes soaring. This spike has largely been reversed in the latest surveys.
Foreign exchange turnover rose in April 2017 compared to October and April 2016 thanks mainly to a surge in activity in the UK.
Six regional foreign exchange committees have released their latest semi-annual reports on FX turnover and together they indicate a 5.3% increase from October and a 2.8 rise on activity in April 2016.Overall the data from the committees suggest a slight increase in global activity and were the Bank for International Settlements to produce an annual turnover report instead of the current triennial report, it would indicate the FX market is now a $5.23 trillion per day industry.
This is normally the column where I “entertain” you with my own semi-annual complaint about the FX committees’ semi-annual turnover reports all being different (perhaps this is a task for the GFXC – produce uniform reporting?) I have, though, given up on that crusade for a while and prefer to take the data for what it is – an interesting snapshot into the FX market on a regional basis.
The surveys in the UK and US are the most comprehensive (but still structured differently!) and I wonder if we are starting to see evidence of the impact democratisation in FX markets?
The latest round of FX turnover data from six of the world’s FX Committees shows volume at its highest level since they started recording results in 2005. The new high mark was powered by new peaks in activity in the UK, Singapore, Japan and Canada.
The total turnover across Australia, Canada, Japan, Singapore, UK and US was $4.883 trillion per day in April 2018. If the six centres maintained their current share of global turnover, the numbers suggest a BIS survey number just shy of $6 trillion per day.
There are those in the FX world who believe the narrative of a return to bilateral, relationship-based trading was driven by a group of liquidity providers talking their book. Looking at the numbers in last week’s FX committee turnover surveys, specifically the spot e-trading statistics from the UK and US, I think it is fair to say that the cynicism is wrong, or the narrative is working, or both, because the last two years has seen a definitive shift in trading away from anonymous venues towards disclosed channels.
Aside from what one news service decided was the headline – more like click bait – “FX Volumes Slump Globally” (guess what, yes, there was a dip from April, but on a more considered year-on-year basis FX turnover is up 8.9% at the third highest mark ever), there were actually a few interesting snippets in this week’s FX committee surveys. The two that stood out for me were the surge in RMB trading and a quite remarkable resurgence for the voice brokers in the UK.