A report from TheCityUK indicates that average daily volume in traditional FX market transactions totalled $4.6 trillion in April 2012. When turnover from nontraditional FX derivatives and products was included, that figure rose to $4.9 trillion. Although 5% down on 2011, turnover remains close to record levels.
The UK-based financial and professional services groups report models the twice-yearly FX turnover releases from leading central banks, as closely as possible following the methodology of the Bank for International Settlements (BIS's) comprehensive triennial survey of FX volumes, to reduce any double counting of transactions.
TheCityUK maintains that the volume of FX trading activity remains on a long-term upward trend, notwithstanding the dip in activity in 2009 as the effects of the financial crisis weakened global trade, produced a fall in activity and a wave of deleveraging from international investors.
The group says the long-term upward trend remains intact, given the growing importance of FX as an asset class, the increase in global fund management assets and growth in the use of financial derivatives. In addition, the diverse selection of FX execution venues and the development of electronic platforms has made it easier for retail traders to access the market, the report notes.
London was the main centre for FX trading, with average daily turnover of traditional FX products totalling $1.86 trillion in April 2012, along with a further $141 billion traded in currency derivatives. That took Londons market share of global FX up to 38%, from 37% in the last biennial BIS survey in 2010. The US was the second-largest centre, with 18% of the global total. Singapore and Japan were the next largest centres with about 5% each. Most of the remainder was accounted for by Germany, Switzerland, Canada, France, Australia and Hong Kong.
Twice as many dollars are traded on the FX market in the UK as in the US, and more than twice as many euros are traded in the UK than in all the eurozone countries combined. That reflects Londons position as Europes leading financial centre and the worlds leading international financial centre.
The report notes that around half of European investment activity is conducted in London. About 80% of Europes hedge funds are managed in London, which is also Europes main centre for FX prime brokerage. Geography plays its part, with trading activity at its highest when leading markets overlap. That produces spikes in trading early in European time and as North American markets open.