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Pension funds boost FX trading volumes

Foreign exchange trading volumes increased in 2005 thanks to a considerable boost from fund managers, pension funds and non-traditional FX traders like the so-called "aggregators" that facilitate retail trading, but the market could not maintain the 25% growth rate set in 2004.

This article appears courtesy of Global Investor.
By Claire Milhench

Global FX trading volume rose by 14% in 2005, according to a new report by Greenwich Associates. As the recent acceleration in hedge fund trading activity stalled, fund managers and pension funds picked up the slack by increasing the amount of FX trading in connection with cross-border investments and by becoming more active traders of FX as an independent asset class. Another significant portion of the year's growth was generated by relatively new sources of FX trading volume.

"Foreign exchange trading volumes among the broad category of financial institutions increased 18% worldwide year-to-year, a level of activity far exceeding that of corporate FX users," said Peter D'Amario, a Greenwich consultant. "Included in that financial category are fund managers and pensions, hedge funds, and banks and other types of financials that are sharply increasing their trading volumes due in large part to the growth of the retail customer base."

Among the key findings of the Global Treasury Management Research Study, was that secular and cyclical markets trends are working to limit growth in interest rate derivatives trading, where volumes were flat from 2004; and that electronic FX trading systems were having a tougher time attracting new institutional clients.

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