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Foreign Exchange

Exchanges: Donohue says CME is leading the market

Chief executive of the Chicago Mercantile Exchange thinks pressure is building for exchange-traded model.

The debate about whether or not the foreign exchange market will ever fully adopt an exchange-traded model has been raging for years. It is likely to continue, with proponents and detractors able to put forward good arguments why it will and why it won’t.

A frequent claim is that activity in the exchange-traded FX market is minuscule when compared with the over-the-counter environment. Ostensibly this appears to be true but a more complex, different picture lies underneath the bare figures.

Craig Donohue, CME: seeing some underlying shifts in the FX market

According to the most recent Bank for International Settlements Triennial Central Bank Survey, overall daily activity in April 2004 in the OTC FX market totalled about $1.9 trillion. By contrast, notional volume at the Chicago Mercantile Exchange, by far the largest regulated FX marketplace, came in at just $17 billion a day during the same period, less than 1% of the total turnover. Since April 2004, the FX market has continued to post strong growth in turnover; daily activity now is thought to be in the region of $2.5 trillion.

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