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Foreign Exchange

Technology: Full steam ahead for US FX trading

Alpha-driven US volume growth starts to outpace that in UK

Foreign exchange trading volumes are showing no signs of letting up, according to the latest FX surveys conducted by the Federal Reserve and the Bank of England. The results also indicated that US trading volumes are strongly outpacing those in the UK.

The Bank of England's foreign exchange joint standing committee reported that UK daily average spot volumes reached $233 billion in April, 12.6% up on the $207 billion reported in October 2004. In comparison, the Fed's foreign exchange committee in the US noted that daily average spot volumes hit $195 billion in April, up 16% on the $168 billion last October.

UK bankers hotly contest the notion that London could be losing its stronghold position in the $1.9 trillion-a-day FX market, where it has a one-third share. But there's no reason why the US is not capable of closing the gap even more.

"It certainly seems the case that the foreign exchange market is enticing US investors," says Glenn Stevens, managing director of GAIN Capital. "Hedge funds are driven by alpha, and FX was a natural place for them to go. There's been a huge increase in the comfort level of trading FX, and US hedge funds are certainly nimble enough to adapt to new markets and technology."

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