Central bank data shows FX market still growing

Two surveys released this week suggest that while the FX market is still expanding, the rate of growth has slowed. Covering activity in October 2007, the US foreign exchange committee (FXC), which meets under the auspices of the New York Fed, and the UK’s joint standing committee (FX JSC), which is sponsored by the Bank of England, show that activity rose by 13% in the US market from April 2007 and by a more modest 7% in the UK. Total average daily turnover in the US was put at $701 billion, while in London it was $1.334 billion (see table below).

However, it is noticeable that spot activity is still on the up. In New York, turnover rose 35% to an average of $370 billion, while in London it was up 26% to $423 billion. The different growth rates can be attributed partially to the problems in the swap market in August, but more specifically to the increased use of algos and high frequency trading. The implication is that many strategies are very much conducted intraday and are not run overnight.