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Foreign Exchange

Thomson Reuters volumes down 11.5% in August; CME volumes touch 2009 lows

FX volumes at Thomson Reuters and CME Group, two of the market’s leading electronic FX platforms, slumped in August as volatility on the world’s currency markets dropped to its lowest level since the eruption of the global financial crisis.

Thomson Reuters’ FX platform saw its average daily volumes fall by 11.5% to $115 billion last month. That was more than 30% down on August 2011 and the lowest reading of the year so far.

If the traditionally slow month of December is excluded, FX volumes have not been this low at Thomson Reuters since 2009.

Thomson Reuters overtook Icap’s EBS to become the largest FX platform by volume in November 2011.

 Thomson Reuters avaerage daily volumes ($billion)

 

Meanwhile, CME Group average daily FX contract volumes fell by 9% last month from July to an average of 731,000 contracts traded per day. That compounded a 24% volume slowdown seen in July from June and was down 26% year-on-year.

Like at Thomson Reuters, excluding the month of December, FX volumes at CME Group were their lowest since 2009.

Other reporting FX venues, including Icap’s EBS, FXall – which was acquired by Thomson Reuters in July – and Knight Capital’s Hotspot FX are yet to release August FX volumes.

However, it is unlikely that the low volumes figures at Thomson Reuters and CME Group mean they are losing market share.

Indeed, traders at leading banks tell EuromoneyFXNews that volumes were down across the board last month.

That is because the traditional summer lull, while market participants in the northern hemisphere enjoy a vacation, coincided with a marked drop in volatility.

By some measures – one-month implied JPY vols, for instance – volatility dropped to its lowest levels since August 2008, just before the collapse of Lehman Brothers.

One part of that drop in volatility has been improved risk appetite, with investor confidence boosted by European Central Bank president Mario Draghi’s pledge to do “whatever it takes” to ensure the survival of the eurozone.

Hopes of further quantitative easing in the US have also helped to buoy investor sentiment.

Some, such as investment bank JPMorgan, have suggested the drop in volatility is a sign that investors have become complacent and are under-estimating the risks to the global economy.

That theory could well get its first test later on Thursday, as Draghi outlines his plans for a scheme to stabilize eurozone peripheral debt.

Disappointment with his plans could boost volatility and activity in a flagging FX market for the remainder of the year.

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