Value of global FX volumes up 12.5%, Euromoney finds

The Euromoney FX Survey 2012 was conducted between January 26 and March 2, and took in 15,423 responses from the world’s leading currency investors on their dealing activity during 2011. The results of the 2012 survey were published in May.

New data from the survey figures show that FX options market volumes fell year-on-year in 2011 by 23.33%. However, FX spot trading volumes were up year-on-year by 16.13%, and electronic trading volumes also rose last year compared with 2010, by 24.32%.

EMEA was the largest FX market by volume in 2011 at $97.1 trillion, up 4.3% from $93.1 trillion in 2010. However, growth has slowed in the region since 2009, with central and eastern European transacted currency volumes most affected by turmoil in the eurozone.

Growth was much more vibrant across the Atlantic, with the value of North American FX volumes rising by 23.4% in 2011 to $55.6 trillion, up from $45.1 trillion in 2010.

And the Latin America/Caribbean FX market also saw strong volume growth in 2011, up 31.54% to $3.6 trillion, albeit from a small base level.

Within specific groups of FX market participants, hedge funds – which transacted $41 trillion in currency trades in 2011 from $39.5 trillion in 2010 – told the survey that counterparty credit ratings are now the most important factor in choosing liquidity providers.

In 2010, the surveyed hedge funds said they valued “insight into FX” as the most important factor in counterparty consideration.

However, among the largest hedge fund FX dealers, which transact more than $100 billion per year, the “ability to deal in size” was the leading factor in selecting a counterparty, unchanged from 2010, says the survey.

Credit ratings also became the new leading factor for real-money FX volume providers in 2011, for both smaller managers and those operating from a market business base of $100 billion or more.

Real-money FX volume values grew to $34 trillion in 2011 across all products, up 10.62% year-on-year, while spot volumes jumped markedly by 25.17% last year to touch $16.9 trillion.

At global banks included in the survey, options volumes were seen declining in 2011 by 35.02% to $1.1 trillion from $1.7 trillion in 2010. Bank FX volumes across all products grew by 9.98% last year to $74.5 trillion, with spot trading and e-trading recording the best growth at 10.25% and 14.71%, respectively.

Also, credit rating took over from “insight into FX” for banks when considering counterparties. However, at banks with an FX business base of $100 billion or more, “electronic execution” of trades remained the leading factor when selecting trading partners last year, unchanged from 2010.

Corporate FX market volumes rose by 14.5% in 2011 to $25.2 trillion, with spot trading seeing a 21.5% year-on-year increase while options volumes were down 3.75% to $400 billion along with e-trading volumes, which declined 3.95% to $8 trillion.

Corporates with an FX market business base of $25 billion or more decided in 2011 that, when selecting counterparties, credit ratings are now more important than the view in 2010 that “insight into FX” was important.