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Foreign Exchange

FX news: official semi-annual figures show FX volumes at record levels

Figures released this week by FX committees in the major centres showed that average daily FX volumes now firmly exceed pre-crisis levels.

London’s Joint Standing Committee (JSC), chaired by The Bank of England, reported average daily FX turnover during October 2010 of $1,821 billion (or $1,802 billion excluding currency swaps); this figure was 8% higher than April 2010, a massive 24% higher than October 2009 and the highest figure ever recorded by the survey.

Volume was up on April in all products except outright forwards (which inexplicably showed a decline to $151 billion from $161 billion): spot FX at an average of $697 billion per day (compared with April’s $625 billion and October 2009’s $513 billion), FX swaps at $798 billion (compared with $754 billion in April 2010 and $704 billion in October 2009) and currency options at $119 billion (compared with $110 billion in April 2010 and $95 billion in October 2009).

The figures for ‘market share’ show a concentration of business to a few banks even more severe than seen in last year’s Euromoney survey which showed more than 90% of FX trades falling to the to 20 banks. The JSC figures are collated from its survey of 29 reporting banks which domicile their FX operations in London (including data from Credit Suisse, UBS, Standard Chartered and SEB which the other official figures do not cover): the top two quintiles (i.e. 12 banks) are responsible for 91.5% of spot FX, 90% of outright forwards, 80% of FX swaps and almost 95% of currency option business.

New York’s Foreign Exchange Committee (FXC), sponsored by the New York Federal Reserve, reported record average daily volume (in spot FX, outright forwards, FX swaps and currency options) of $772 billion (surpassing October 2008’s figure of $762 billion); the latest figure was 2% higher than April 2010 and 14% higher than October 2009.

Despite the overall figure being a record, spot FX average daily volume in October 2010 was, at $405 billion, lower than April 2010’s $418 billion but up on October 2009’s $388 billion. All other products showed good increases in volumes: outright forwards average daily volume was $119 billion (up $15billion on April 2010 and $34 billion on October 2009), volume in FX swaps was $207 billion (up $4billion on April 2010 and $30 billion on October 2009) and volume in currency options was a healthy $41 billion (up $11billion on April 2010 and $16 billion on October 2009)

In the New York market, more than 90% of spot FX and currency option business is transacted by ten of the 25 banks surveyed together with 80% of outright forwards and 73% of FX swaps.

Data was also published by the Singaporean, Australian, and Canadian foreign exchange committees. Singapore also showed greater volume than that reported pre-crisis: average daily volumes in spot FX, outright forwards, FX swaps and currency options totalled $303 billion compared with the pre-crisis record of $280 billion and figures of $259 billion and $243 billion for April 2010 and October 2009 respectively. Spot FX volume in October 2010 was $100 billion, outright forwards $54 billion, FX swaps $129 billion and currency options $19 billion. For the same products the Australian committee reported average daily volume totalling of $198 billion (comprising volume increases on the previous survey in outright FX and FX swaps but a decline in spot FX volume to $44 billion from $60 billion) and the Canadian committee came in with an overall figure of $58 billion.

The JSC report states that, although there are some differences in methodology between the semi-annual reports and the Bank for International Settlements triennial survey, “the two surveys are broadly comparable.” However, methodological differences aside (together with the fact that even the semi-annual snapshots are just that and don’t reflect dire summer volumes), the BIS report also includes figures from mainland Europe and Japan. This means that the sum of the reports published this week falls short of the overall global turnover figure of $3,981 billion reported by the BIS. But this week’s sum total number of $3,182 billion does suggest that, at 7% over the aggregate for April 2010, the boom in FX continues.

There are some conclusions that one might tentatively draw from this week’s data:

1) London’s hold on the FX market looks as tight as ever, despite the increased costs of UK domicile with the bank levy.

2) Singapore, with an 18.9% increase in turnover of ‘traditional’ FX products in the latest survey, is now half as big again in terms of volumes as Sydney. But we will have to wait until July and the next reports from Japan and Hong Kong to determine whether Singapore has achieved FX pre-eminence in the Asia-Pacific region.

3) There might have been some move back to product complexity: currency option volumes were slightly down in the triennial report but the aggregate volume figure from the surveys published this week is 14% up on six-months previously. All the increase comes from the London and New York figures.

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