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Capital Markets

Foreign exchange: Forex boosts credentials as asset class of its own

Spot trading has risen 50% in past three years; Non-bank participation increases

The Bank for International Settlements released the results of its triennial survey into Foreign exchange and derivatives market activity at the beginning of September. The survey, reflecting market activity in April 2010, is the eighth in a series conducted every three years since 1989.

Coordinated by the BIS, 53 central banks and monetary authorities collected data from 1,309 banks and other dealers (compared with 1,260 in 2007) on turnover in FX instruments. The headline figure showed that of aggregate average daily turnover (the sum of figures for spot, outrights, swaps, currency swaps, and options) of $3,981 billion, up almost 20% from $3,324 billion in 2007.

The biggest driver of the increase was spot FX trading: average daily turnover was up almost 50% at $1,490 billion in April 2010 compared with $1,005 billion in April 2007. Turnover in FX swaps was up marginally at $1,765 billion a day and in outright forwards, a combination of spot FX and FX swaps, turnover was up 30% at $475 billion.

An interesting development highlighted by the survey was that, for the first time, trade between "reporting banks" and "other financial institutions" was greater than trades between the banks themselves.

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