Michael King of the Bank for International Settlements and Dagfinn Rime of Norges Bank have published a paper this week that has some extra data on BIS’s Triennial Survey, but doesn’t leave anyone much better informed.
The paper is called The $4 trillion question: what explains FX growth since the 2007 survey? and includes some new numbers from the CME, ICAP/EBS, five single-bank and 12 multi-bank trading systems.
King and Rime find there was impressive 20% growth in FX market activity since 2007, but this is a slowdown on the 72% growth witnessed between 2004 and 2007.
Their paper goes on to point out that the robustness of the market over the crisis “owes much to the role of CLS bank”.
Looking at the 2010 Triennial survey, they find the vast majority of the growth “reflects the increased activity of ‘other financial institutions’”, including smaller banks, insurance companies, central banks, pension funds and hedge funds.
Within this category, the main contribution to higher turnover came from high-frequency traders, smaller banks that are clients of larger FX banks, and retail traders.
Investment in electronic execution methods has “increased competition, lowered transaction costs and encouraged the entry of new participants in global FX markets.”
Earth-shattering news.
However, “While banks engaged in FX markets below the top tier continue to be important players, the long-term trend towards greater concentration of FX activity in a few global banks continues.”
Which is much what Euromoney’s FX survey has been suggesting for a few years.