UK Drives FX Turnover Growth

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.

The UK FX Joint Standing Committee (JSC) reports average
daily volume (ADV) of $2.44 trillion in April 2017, an 11.7% increase from
October and a 9.7% increase year-on-year. The number also represents the second
highest ADV since the JSC started reporting turnover, it is beaten only by
October 2014’s $2.71 trillion.

The increase was largely driven by FX swaps, which totalled
$1.17 trillion per day – a 14% increase from October and 11.2% up year-on-year.

Activity was up across the board in the UK, however, spot
ADV was 8.1% higher that October at $748 billion ($6 billion lower than April
2016); outright forwards’ volume was 11.8% higher than October at $257 billion
(+19.5% from April 2016); NDFs trading was $80 billion per day, up 29% from
October (up 33% year-on-year) and ADV in FX options was $148 billion per day, a
9.6% increase from October and up 34.5% year-on-year.

The increase in activity came across all counterparty
segments, although there was a decline in spot activity between Reporting

In the US the picture was more mixed with the Foreign
Exchange Committee (FXC) reports ADV of $889.5 billion, up 1.6% from October
and fractionally down (0.4%) on April 2016.

Within the headline data, spot and FX options activity
declined on a year-on-year basis, but this was balanced out by an increase in
outrights and FX swaps. Spot activity was 6% lower than the previous April at
$375.4 billion (unchanged from October 2016) and FX options ADV declined by
12.8% to $37.5 billion from the previous April (9% down from October).

It was better in outrights, where activity was $189.2
billion per day, up 5.3% year-on-year and 3.9% from October. FX swaps activity
registered $287.4 billion, up 6% from April 2016 and 1.5% up from October 2016.

Singapore recorded a year-on-year drop across the board in
terms of FX activity, reporting ADV of $462.9 billion which represents a 3.8%
drop from October and a 8.6% drop from April 2016.

Across the various products, spot ADV was $114.7 billion,
down 6.2% from October but 10.6% higher than the previous April, while
outrights ADV was $73.7 billion, down a whopping 41.3% from October and 25.5%
lower than April 2016.

FX swaps activity in Singapore was 8.6% lower than April
2016 but was 14% higher from October. FX options ADV was $32 billion, a 5.8%
increase year-on-year and 5.5% higher than October. Currency swap activity at
$44.5 billion in Singapore was unchanged from October but down 23.3%

It was a similar picture in Japan where the Tokyo FXC
reports ADV of $353.2 billion, down 8.6% from October and 13.5% from the
previous April.

Within this, spot activity declined to $93.8 billion from
$106.2 billion in October (an 11.7% drop) and $121.7 billion in April 2016
(-23.9%). FX swap activity was 13.7% lower year-on-year and 11.1% down from
October at $180.7 billion, while FX options ADV declined to $7.9 billion from
$9.1 billion in October (-12.7%) and $9.7 billion in April 2016 (-18.6%).

The only bright spot in the Tokyo report came from outrights
and currency swaps; outrights ADV was $67.7 billion, up 4% from October and
9.5% higher than April 2017, while currency swap activity rose to $3.1 billion
per day in April 2017 from $2.7 billion in October, but was down from $4.6
billion in April 2016.

Average daily volume in Australia was broadly unchanged from
October 2016 at $125.7 billion in April 2017, however activity was 6.7% lower
than April 2016.

Perhaps highlighting expectations of a very stable Reserve
Bank of Australia monetary policy in the midst of changes elsewhere, FX swaps
saw a decline in activity from both October and April surveys in 2016. ADV in
FX swaps was $83.6 billion, down 7.2% from October and 6.2% lower than April

At $27 billion per day FX spot activity actually rose in
Australia from October’s $23.4 billion, however it was 14.1% lower
year-on-year. Meanwhile, outrights and FX options both saw increases,
outrights’ ADV was $11.2 billion up from $7.7 billion in October ($9.8 billion
in April 2016) and FX options turnover was $1.2 billion, up from $856 million
in October ($983 million in April 2016).

Finally, the Canadian Foreign Exchange Committee reports
daily turnover of $86.2 billion in April 2017, up 12.2% from October 2016 and
1.8% higher than the previous April.

Spot activity in Canada was $17 billion per day, up from
$15.8 billion in October and slightly higher than April 2016’s $16.8 billion.
Elsewhere, FX swaps ADV was $47.9 billion, up from $43.3 billion in October and
$47.7 billion in April 2016, while outright activity was $14.9 billion per day,
a healthy increase from $11.8 billion in October and $12.7 billion in April

Average daily turnover in FX derivatives, which includes
currency swaps and FX options, was $6.4 billion per day in Canada, up from $5.8
billion in October but down from April 2016’s $7.5 billion.

Overall the data from the committees suggests 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 suggest the FX market is now a $5.23 trillion per day industry.

Twitter @lamboPnL

Twitter @Profit_and_Loss

Colin Lambert

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