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Foreign Exchange

Retail FX sales: The size of the market

The retail FX market has seen an incredible increase in trading volume. The latest data from the largest global market survey indicates retail accounts for nearly $20 trillion in annual flow, or around $80 billion a day.

List of categories included in the full 2008 FX poll results 

A lot has been written about the emergence of retail players in FX; there has been much conjecture about how many platforms now exist to cater for this audience; there is plenty of discussion about the size of this particular market segment. All of this information is buried somewhere in Euromoney’s FX poll data.

There is a category for FX platforms so, in theory, the information should be easy to access. This year, there were 224 votes from so-called FX platforms, accounting for $12.5 trillion of annual flow. Most of this business is spot. Assuming that around one-third of the total reported volume of $175 trillion was spot suggests that retail now accounts for around 21% of this market segment.

Unfortunately, these figures could be inaccurate because many of the self-labelled FX platforms are nothing of the kind – the voters have simply filled in the wrong category. By removing those who are not platforms, the number falls to ‘just’ 124 and turnover drops to $10.5 trillion. But to confuse matters further, around 20 platforms voted in another category – non-bank market participants. These 20 players accounted for a further $9.4 trillion of flow, suggesting that retail accounts for annual flow to the banks of nearly $20 trillion, or around $80 billion a day.

This number may only be a guestimate but it does have some validity. There are numerous differences in the business models of the platforms – some seek to internalise flow, while others push it straight through and either charge an explicit commission or add a spread. Also, there really is no such thing as a clearly defined retail sector. Many of the platforms service institutional clients and, increasingly, high-net wealth individuals. The lines have become so blurred that some banks are examining the feasibility of providing multiple APIs to single firms to try and make a distinction between what is considered benign and toxic flow.

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