FX: Triennial BIS survey has market players mulling settlement risk and attractions of listed products
As the industry digests the results of the latest BIS triennial FX survey, Euromoney canvasses opinion on the implications of the key findings.
Turnover in over-the-counter (OTC) FX markets averaged $7.5 trillion per day in April, according to the latest triennial survey by the Bank for International Settlements (BIS), an increase of 14% from its April 2019 survey.
The period of data collection coincided with heightened volatility due to changing expectations about the path of future interest rates in advanced economies, rising commodity prices and geopolitical tensions after the Russian invasion of Ukraine. It is also possible that the actual figure was even higher, since pandemic restrictions were in place in several reporting jurisdictions, including China and Hong Kong.
Jerome Kemp, president of Baton Systems – a fintech focusing on post-trade processing – reckons the trading volume poses important questions about settlement risk, specifically the growth in trading in non-CLS settled currencies. There has been a particularly noticeable jump in renminbi trading, which has increased by more than 50% since 2019.
“This has amplified the need for on-demand settlement to reduce the possibility of a trade moving against a counterparty and impacting their ability to settle,” he says.