London Benefits As Forex And Derivatives Trading Surges
Turnover in traditional foreign exchange instruments increased by an unprecedented 71% to $3.2 trillion in the last three years, according to the Bank for International Settlements. During the period London, Switzerland and Singapore gained market share, while the shares of the United States and Japan dropped.
Although broad-based across instruments, growth in FX swap turnover was particularly strong, up by 82% in April 2007, the BIS said in its Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2007.
Reporting dealers’ foreign exchange market turnover with both other financial institutions and non-financial customers more than doubled since the previous survey in 2004. As a consequence, the share of transactions between reporting dealers and other financial institutions, which mainly comprise hedge funds, mutual funds, pension funds and insurance companies, increased by 7 percentage points to 40%.
London’s markert share grew to 34.1% from 31.3% while the US share fell to 16.6% from 19.2%.
Activity in OTC derivatives markets also continued to expand at a rapid pace. Average daily turnover of interest rate and non-traditional foreign exchange contracts increased by 71% to $2.1 trillion in April 2007.
Turnover of foreign exchange options and cross-currency swaps more than doubled to $0.3 trillion per day, thus outpacing the above-mentioned growth in “traditional” instruments such as spot trades, forwards or plain FX swaps Less brisk growth was recorded in the much larger interest rate segment, where average daily turnover increased by 64% to $1.7 trillion.
The derivatives market shares of London and the US were virtually unchanged from 2004 at 42.5% and 23.8% respectively.
The complete report with statistical tables for individual currencies, instruments and countries, can be downloaded at no charge here.
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