BANK FOR INTERNATIONAL SETTLEMENTS Triennial Central Bank Survey Foreign exchange turnover in April 2016 Monetary and Economic Department
Triennial Central Bank Survey Foreign exchange turnover in April 2016 Monetary and Economic Department September 2016
Tools to access and download the results of the bis Triennial Central Bank Survey. osite- tables in pdf of the bis s most current data BIS Statistics Explorer-a browsing tool for pre-defined views of the BIS's most current data BIS Statistics Warehouse -a search tool for customised queries of the BIS's most current data Questions about the BiS Triennial Central Bank Survey may be addressed to statistics@bis. org Thispublicationisavailableonthebiswebsite(www.bisorg/publ/rpfx16.htm) o Bank for International Settlements 2016. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated
Tools to access and download the results of the BIS Triennial Central Bank Survey: • BIS website – tables in PDF of the BIS’s most current data • BIS Statistics Explorer – a browsing tool for pre-defined views of the BIS’s most current data • BIS Statistics Warehouse – a search tool for customised queries of the BIS’s most current data Questions about the BIS Triennial Central Bank Survey may be addressed to statistics@bis.org. This publication is available on the BIS website (www.bis.org/publ/rpfx16.htm). © Bank for International Settlements 2016. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated
Foreign exchange turnover in April 2016 Contents Notations Abbreviations BIS Triennial Central Bank Survey. Highlights 2. Turnover in foreign exchange markets. Turnover by currencies and currency pairs 22334457 Turnover by instrument and maturity…… Turnover by counterparty ....... Geographical distribution of turnover Annexe Tables Explanatory notes…… Turn Instruments 17 Counterparties 17 Currencies and currency pairs.... Maturities…. Elimination of double-counting ........................20 This publication presents the global results of the 2016 BIS Triennial Central Bank Survey of turnover foreign exchange markets. A separate publication presents the results of turnover in over-the-counter interestratederivativesmarkets(www.bis.org/publ/rpfx16.htm).Manyparticipatingauthoritiesalso publish their national results, links to which are available on the BIs website (www.bis.org/statistics/triennialrep/national.htm).Theglobalresultsforacompanionsurveyonamounts outstanding in OTC derivatives markets will be published in November 2016 Data are subject to change. Revised data will be released concurrently with the B/S Quarterly Review in December 2016. The December 2016 B/S Quarterly Review will include several special feature articles that analyse the results of the 2016 Triennial Survey BIS Triennial Central Bank Survey 2016
BIS Triennial Central Bank Survey 2016 1 Foreign exchange turnover in April 2016 Contents Notations.............................................................................................................................................................................................. 2 Abbreviations...................................................................................................................................................................................... 2 1. BIS Triennial Central Bank Survey............................................................................................................................. 3 Highlights .................................................................................................................................................................................... 3 2. Turnover in foreign exchange markets .................................................................................................................. 4 Turnover by currencies and currency pairs.................................................................................................................... 4 Turnover by instrument and maturity.............................................................................................................................. 5 Turnover by counterparty..................................................................................................................................................... 7 Geographical distribution of turnover............................................................................................................................. 8 Annexes ................................................................................................................................................................................................ 9 A Tables................................................................................................................................................................................... 9 B Explanatory notes .........................................................................................................................................................15 Participating authorities ......................................................................................................................................................15 Coverage....................................................................................................................................................................................16 Turnover data ..........................................................................................................................................................................16 Instruments...............................................................................................................................................................................17 Counterparties.........................................................................................................................................................................17 Trading relationships ............................................................................................................................................................19 Currencies and currency pairs...........................................................................................................................................19 Maturities ..................................................................................................................................................................................20 Elimination of double-counting .......................................................................................................................................20 This publication presents the global results of the 2016 BIS Triennial Central Bank Survey of turnover in foreign exchange markets. A separate publication presents the results of turnover in over-the-counter interest rate derivatives markets (www.bis.org/publ/rpfx16.htm). Many participating authorities also publish their national results, links to which are available on the BIS website (www.bis.org/statistics/triennialrep/national.htm). The global results for a companion survey on amounts outstanding in OTC derivatives markets will be published in November 2016. Data are subject to change. Revised data will be released concurrently with the BIS Quarterly Review in December 2016. The December 2016 BIS Quarterly Review will include several special feature articles that analyse the results of the 2016 Triennial Survey
Notations billion thousand million trillion thousand billion e estimated h left-hand scale rhs right-hand scale US dollar unless specified otherwise not available not nil or negligible Differences in totals are due to rounding The term "country"as used in this publication also covers territorial entities that are not states as understood by international law and practice but for which data are separately and independently maintained Abbreviations ARS Argentine peso LTL Lithuanian litas AUD Australian dollar LVL Latvian lats BGN Bulgarian lev MXN Mexican peso BHD BRL Brazilian real Norwegian krone CAD Canadian dollar NZD New Zealand dollar OTH er currencies CLP Chilean peso PEN Peruvian new sol CNY Chinese yuan(renminbi) PHP philippine peso Colombian peso PLN Polish zloty CZK Czech koruna RMB renminbi see cny DKK Danish krone RON new romanian leu GBP pound sterling SAR Saudi riyal HKD Hong Kong dollar SEK Swedish krona HUF Hungarian forint SGD Singapore dollar IDR Indonesian rupiah THB Thai Israeli new shekel INR Indian rupee TWD new taiwan dollar USD US dollar KRW Korean won ZAR South african rand Is Triennial Central Bank Survey 2016
2 BIS Triennial Central Bank Survey 2016 Notations billion thousand million trillion thousand billion e estimated lhs left-hand scale rhs right-hand scale $ US dollar unless specified otherwise … not available . not applicable – nil or negligible Differences in totals are due to rounding. The term “country” as used in this publication also covers territorial entities that are not states as understood by international law and practice but for which data are separately and independently maintained. Abbreviations ARS Argentine peso LTL Lithuanian litas AUD Australian dollar LVL Latvian lats BGN Bulgarian lev MXN Mexican peso BHD Bahraini dinar MYR Malaysian ringgit BRL Brazilian real NOK Norwegian krone CAD Canadian dollar NZD New Zealand dollar CHF Swiss franc OTH other currencies CLP Chilean peso PEN Peruvian new sol CNY Chinese yuan (renminbi) PHP Philippine peso COP Colombian peso PLN Polish zloty CZK Czech koruna RMB renminbi; see CNY DKK Danish krone RON new Romanian leu EUR euro RUB Russian rouble GBP pound sterling SAR Saudi riyal HKD Hong Kong dollar SEK Swedish krona HUF Hungarian forint SGD Singapore dollar IDR Indonesian rupiah THB Thai baht ILS Israeli new shekel TRY Turkish lira INR Indian rupee TWD new Taiwan dollar JPY yen USD US dollar KRW Korean won ZAR South African rand
1. BIS Triennial Central Bank Survey The BiS Triennial Central Bank Survey is the most comprehensive source of information on the size and structure of global foreign exchange(FX)and over-the-counter(OTC)derivatives markets. The Triennial Survey aims to increase the transparency of oTC markets and to help central banks, other authorities and market participants monitor developments in global financial markets. It also helps to inform discussion on reforms to otc markets FX market activity has been surveyed every three years since 1986, and otc interest rate derivatives market activity since 1995. The Triennial Survey is coordinated by the BiS under the auspices of the Markets Committee(for the FX part) and the Committee on the Global Financial System(for the interest rate derivatives part). It is supported through the Data Gaps Initiative endorsed by the G20 The latest survey of turnover took place in April 2016. Central banks and other authorities in 52 jurisdictions participated in the 2016 survey (see page 15). They collected data from close to 1, 300 banks and other dealers in their jurisdictions and reported national aggregates to the BiS, which then calculated global aggregates. turnover data are reported by the sales desks of reporting dealers, regardless of where a trade is booked, and are reported on an unconsolidated basis, ie including trades between related entities that are part of the same group Highlights Highlights from the 2016 Triennial Survey of turnover in oTC foreign exchange market Trading in foreign exchange markets averaged $5. 1 trillion per day in April 2016. This is down rom $5. 4 trillion in April 2013, a month which had seen heightened activity in Japanese yen against the background of monetary policy developments at that time For first time since 2001, spot turnover declined. Spot transactions fell to $1.7 trillion per day in April 2016 from $2.0 trillion in 2013. In contrast, the turnover of FX swaps rose further, reaching $2.4 trillion per day in April 2016. This rise was driven in large part by increased trading of FX swaps involving yen The Us dollar remained the dominant vehicle currency, being on one side of 88% of all trades April 2016. The euro, yen and Australian dollar all lost market share. In contrast, many emerging market currencies increased their share the renminbi doubled its share to 4%, to become the world's eighth most actively traded currency and the most actively traded emerging market currency, overtaking the Mexican peso. The rise in the share of renminbi was primarily due to the increase in trading against the US dollar. In April 2016, as much as 95% of renminbi trading volume was against the The share of trading between reporting dealers grew over the three-year period, accounting for 42%of turnover in April 2016, compared with 39% in April 2013. Banks other than reporting dealers accounted for a further 22% of turnover. Institutional investors were the third largest group of counterparties in FX markets, at 16% In April 2016, sales desks in five countries-the United Kingdom, the United States, Singapore, Hong Kong SAR and Japan -intermediated 77% of foreign exchange trading, up from 75% in April 2013 and 71% in April 2010 More frequent regional surveys are conducted by local foreign exchange committees in Australia, Canada, London, New York, Singapore and Tokyo. These semiannual surveys focus on the structure of local FX markets, and there are some methodological differences compared with the Triennial Survey. In particular, the Triennial Survey collects data based on the location of the sales desk, whereas some regional surveys are based on the location of the trading desk. BIS Triennial Central Bank Survey 2016
BIS Triennial Central Bank Survey 2016 3 1. BIS Triennial Central Bank Survey The BIS Triennial Central Bank Survey is the most comprehensive source of information on the size and structure of global foreign exchange (FX) and over-the-counter (OTC) derivatives markets. The Triennial Survey aims to increase the transparency of OTC markets and to help central banks, other authorities and market participants monitor developments in global financial markets. It also helps to inform discussions on reforms to OTC markets. FX market activity has been surveyed every three years since 1986, and OTC interest rate derivatives market activity since 1995.1 The Triennial Survey is coordinated by the BIS under the auspices of the Markets Committee (for the FX part) and the Committee on the Global Financial System (for the interest rate derivatives part). It is supported through the Data Gaps Initiative endorsed by the G20. The latest survey of turnover took place in April 2016. Central banks and other authorities in 52 jurisdictions participated in the 2016 survey (see page 15). They collected data from close to 1,300 banks and other dealers in their jurisdictions and reported national aggregates to the BIS, which then calculated global aggregates. Turnover data are reported by the sales desks of reporting dealers, regardless of where a trade is booked, and are reported on an unconsolidated basis, ie including trades between related entities that are part of the same group. Highlights Highlights from the 2016 Triennial Survey of turnover in OTC foreign exchange markets: • Trading in foreign exchange markets averaged $5.1 trillion per day in April 2016. This is down from $5.4 trillion in April 2013, a month which had seen heightened activity in Japanese yen against the background of monetary policy developments at that time. • For first time since 2001, spot turnover declined. Spot transactions fell to $1.7 trillion per day in April 2016 from $2.0 trillion in 2013. In contrast, the turnover of FX swaps rose further, reaching $2.4 trillion per day in April 2016. This rise was driven in large part by increased trading of FX swaps involving yen. • The US dollar remained the dominant vehicle currency, being on one side of 88% of all trades in April 2016. The euro, yen and Australian dollar all lost market share. In contrast, many emerging market currencies increased their share. The renminbi doubled its share, to 4%, to become the world’s eighth most actively traded currency and the most actively traded emerging market currency, overtaking the Mexican peso. The rise in the share of renminbi was primarily due to the increase in trading against the US dollar. In April 2016, as much as 95% of renminbi trading volume was against the US dollar. • The share of trading between reporting dealers grew over the three-year period, accounting for 42% of turnover in April 2016, compared with 39% in April 2013. Banks other than reporting dealers accounted for a further 22% of turnover. Institutional investors were the third largest group of counterparties in FX markets, at 16%. • In April 2016, sales desks in five countries – the United Kingdom, the United States, Singapore, Hong Kong SAR and Japan – intermediated 77% of foreign exchange trading, up from 75% in April 2013 and 71% in April 2010. 1 More frequent regional surveys are conducted by local foreign exchange committees in Australia, Canada, London, New York, Singapore and Tokyo. These semiannual surveys focus on the structure of local FX markets, and there are some methodological differences compared with the Triennial Survey. In particular, the Triennial Survey collects data based on the location of the sales desk, whereas some regional surveys are based on the location of the trading desk
2. Turnover in foreign exchange markets According to the 2016 Triennial Survey, turnover in global FX markets averaged $5.1 trillion per day in 2016(Table 1). This is down from $5. 4 trillion in April 2013, a month which had seen heightened activity in Japanese yen against the background of monetary policy developments at that time. In addition, exchange rate movements influence comparisons with previous surveys. In particular, the appreciation of the us dollar between 2013 and 2016 reduced the us dollar value of turnover in currencies other than the US dollar. When valued at constant(April 2016)exchange rates, turnover increased slightly, by about 4% between April 2016 and April 2013(Table 1). Nevertheless, the latest developments contrast with the strong growth in turnover observed between Triennial Surveys since 2001 Turnover by currencies and currency pairs The us dollar remained the worlds dominant vehicle currency. It was on one side of 88% of all trades in April 2016, up slightly from 87% in April 2013(Graph 1, left-hand panel). In contrast, trading in the next eight most liquid currencies has shifted notably The role of the euro in FX markets has continued to decline since the beginning of the euro area overeign debt crisis in 2010. The market share of the currency declined to 31% in April 2016 from 33% in April 2013 and 39% in April 2010 ( Graph 1, left-hand panel, and Table 2). Trading in the four most actively traded euro currency pairs-USD/EUR, EUR/GBP, EUR/JPY and EUR/CHF - fell. USD/EUR average daily turnover declined by $119 billion, while the relative declines were most pronounced for the EUR/JPY and EUR/CHF pairs(Table 3). In contrast, trading in the EUR/SEK and EUR/NOK currency pairs increased The share of the yen in global FX trading also declined, by 1 percentage point to 22% by April 2016(Graph 1, left-hand panel, and Table 2). This contrasts sharply with the currency' s 4 percentage point expansion reported in the previous survey, which coincided with the expansionary monetary policy shift of the Bank of Japan in April 2013. Trading in the three most actively traded yen cross rates-USD/JPY, EUR/JPY and JPY/AUD-contracted significantly from 2013 to 2016 Among the other heavily traded advanced economy currencies, the Australian dollar and Swiss franc also lost market share, from 8.6% to 6.9% and 5.2% to 4.8%, respectively; in contrast, the pound sterling, Canadian dollar, Swedish krona and Norwegian krone gained shares in global FX turnover The 2016 Triennial Survey shows a further significant rise in the global importance of several emerging market currencies. The renminbi became the most actively traded emerging market currency, overtaking the Mexican peso to become the worlds eighth most actively traded currency (Table 2). The average daily turnover of renminbi almost doubled, from $120 billion to $202 billion, between April 2013 and April 2016, representing a rise in the share in global FX turnover from 2%to 4%. Ninety-five per cent of renminbi turnover is due to trading against the US dollar. The average turnover of USD/CNY rose from $113 billion to $192 billion over the three-year period, with that pair moving up from ninth to sixth place g airs(table Several other emerging market currencies, particularly from the Asia-Pacific region, gained market share: the Korean won, Indian rupee and Thai baht were among the currencies that advanced in the ranking by two or three places(Table 2). In contrast, the turnover of some emerging market currencies peaked in 2013 and has since exhibited a significant decline(eg the mexican peso and Russian rouble) April 2013, see D Rime and A Schrimpf, Th ugh the lens of the 2013 Triennial Survey, B/s Quarterly Review, December 2013, pp 27-43, Is Triennial Central Bank Survey 2016
4 BIS Triennial Central Bank Survey 2016 2. Turnover in foreign exchange markets According to the 2016 Triennial Survey, turnover in global FX markets averaged $5.1 trillion per day in 2016 (Table 1). This is down from $5.4 trillion in April 2013, a month which had seen heightened activity in Japanese yen against the background of monetary policy developments at that time.2 In addition, exchange rate movements influence comparisons with previous surveys. In particular, the appreciation of the US dollar between 2013 and 2016 reduced the US dollar value of turnover in currencies other than the US dollar. When valued at constant (April 2016) exchange rates, turnover increased slightly, by about 4% between April 2016 and April 2013 (Table 1). Nevertheless, the latest developments contrast with the strong growth in turnover observed between Triennial Surveys since 2001. Turnover by currencies and currency pairs The US dollar remained the world’s dominant vehicle currency. It was on one side of 88% of all trades in April 2016, up slightly from 87% in April 2013 (Graph 1, left-hand panel). In contrast, trading in the next eight most liquid currencies has shifted notably. The role of the euro in FX markets has continued to decline since the beginning of the euro area sovereign debt crisis in 2010. The market share of the currency declined to 31% in April 2016 from 33% in April 2013 and 39% in April 2010 (Graph 1, left-hand panel, and Table 2). Trading in the four most actively traded euro currency pairs – USD/EUR, EUR/GBP, EUR/JPY and EUR/CHF – fell. USD/EUR average daily turnover declined by $119 billion, while the relative declines were most pronounced for the EUR/JPY and EUR/CHF pairs (Table 3). In contrast, trading in the EUR/SEK and EUR/NOK currency pairs increased. The share of the yen in global FX trading also declined, by 1 percentage point to 22% by April 2016 (Graph 1, left-hand panel, and Table 2). This contrasts sharply with the currency’s 4 percentage point expansion reported in the previous survey, which coincided with the expansionary monetary policy shift of the Bank of Japan in April 2013. Trading in the three most actively traded yen cross rates – USD/JPY, EUR/JPY and JPY/AUD – contracted significantly from 2013 to 2016. Among the other heavily traded advanced economy currencies, the Australian dollar and Swiss franc also lost market share, from 8.6% to 6.9% and 5.2% to 4.8%, respectively; in contrast, the pound sterling, Canadian dollar, Swedish krona and Norwegian krone gained shares in global FX turnover. The 2016 Triennial Survey shows a further significant rise in the global importance of several emerging market currencies. The renminbi became the most actively traded emerging market currency, overtaking the Mexican peso to become the world’s eighth most actively traded currency (Table 2). The average daily turnover of renminbi almost doubled, from $120 billion to $202 billion, between April 2013 and April 2016, representing a rise in the share in global FX turnover from 2% to 4%. Ninety-five per cent of renminbi turnover is due to trading against the US dollar. The average turnover of USD/CNY rose from $113 billion to $192 billion over the three-year period, with that pair moving up from ninth to sixth place among the most traded currency pairs (Table 3). Several other emerging market currencies, particularly from the Asia-Pacific region, gained market share: the Korean won, Indian rupee and Thai baht were among the currencies that advanced in the ranking by two or three places (Table 2). In contrast, the turnover of some emerging market currencies peaked in 2013 and has since exhibited a significant decline (eg the Mexican peso and Russian rouble). 2 For a discussion of drivers of trading volumes in April 2013, see D Rime and A Schrimpf, “The anatomy of the global FX market through the lens of the 2013 Triennial Survey”, BIS Quarterly Review, December 2013, pp 27–43, www.bis.org/publ/qtrpdf/r_qt1312e.htm
Foreign exchange market turnover by currency and currency pairs Net-net basis, daily averages in April, in per cent elected currencies2 Selected currency pairs USDEUR USD/JPY 21.8 ME USD/EME USD/CNY 4.6 c USD/MXN 22 EUR/GBP KRW 0 6 一2018 2013 ■20162013 1 Adjusted for local and cross-border inter-dealer double-counting. 2 As two currencies are involved in each transaction, the sum of shares in individual currencies will total 200%. 3 Emerging market currencies Source: BIS Triennial Central Bank Survey. For additional data by currency and currency pairs, see Tables 2 and 3 on pages 10 and 11. Turnover by instrument and maturity Trading activity has changed unevenly across the main FX instrument categories. In particular, trading volumes of spot trades and FX swaps, the two largest instrument categories, have evolved in opposite Spot market trading activity fell by 19% to $1.7 trillion per day in April 2016. This is the first time since 2001 that spot turnover has fallen compared with a previous survey (Table 1). The share of spot transactions in total foreign exchange market turnover declined by 5 percentage points between Apri 013 and April 2016 to 33%(Graph 2). This decline in spot trading was the main driver behind the overall fall in global FX turnover compared with 2013 In contrast, turnover in FX swaps rose by 6% to $2.4 trillion per day in April 2016. FX swaps remained the most traded instrument, with their share in turnover rising 5 percentage points to 47% (Table 3). Still, the growth in FX swap turnover was significantly lower than the 27% growth rate between April 2010 and april 2013 BIS Triennial Central Bank Survey 2016
BIS Triennial Central Bank Survey 2016 5 Foreign exchange market turnover by currency and currency pairs Net-net basis,1 daily averages in April, in per cent Graph 1 Selected currencies2 Selected currency pairs 1 Adjusted for local and cross-border inter-dealer double-counting. 2 As two currencies are involved in each transaction, the sum of shares in individual currencies will total 200%. 3 Emerging market currencies. Source: BIS Triennial Central Bank Survey. For additional data by currency and currency pairs, see Tables 2 and 3 on pages 10 and 11. Turnover by instrument and maturity Trading activity has changed unevenly across the main FX instrument categories. In particular, trading volumes of spot trades and FX swaps, the two largest instrument categories, have evolved in opposite directions. Spot market trading activity fell by 19% to $1.7 trillion per day in April 2016. This is the first time since 2001 that spot turnover has fallen compared with a previous survey (Table 1). The share of spot transactions in total foreign exchange market turnover declined by 5 percentage points between April 2013 and April 2016 to 33% (Graph 2). This decline in spot trading was the main driver behind the overall fall in global FX turnover compared with 2013. In contrast, turnover in FX swaps rose by 6% to $2.4 trillion per day in April 2016. FX swaps remained the most traded instrument, with their share in turnover rising 5 percentage points to 47% (Table 3). Still, the growth in FX swap turnover was significantly lower than the 27% growth rate between April 2010 and April 2013
Foreign exchange market turnover by instrument Net-net basis, daily averages in April Graph 2 2001-16 2016 3000 010407101318 I Adjusted for local and cross-border inter-dealer double-counting Source: BIS Triennial Central Bank Survey. For additional data by instrument, see Table 1 on page 9 The us dollar continues to be on one side of 91% of FX swap transactions, a share virtually unchanged compared with previous surveys. The euro was on one side of 34% of FX swap transactions, also a virtually unchanged share since 2013. The share of the yen in total FX swap turnover rose to 19%in pril 2016, compared with 15% in 2013.3 Trading activity changed unevenly in other parts of the FX OTC derivatives market. Trading volume of outright forwards rose to $700 billion in 2016, a 3% increase from $679 billion in 2013. Trading volume of currency swaps grew much faster than in any other part of the FX market, although this instrument still remains the least traded, owing in part to the long maturity of the contracts. Turnover in currency swaps rose to $96 billion in 2016, a 79% increase from $54 billion in 2013 In contrast, trading volume of FX options declined to $254 billion in 2016, 24% lower than in 2013. The largest decline took place in yen cross rates, which declined to $74 billion in 2016 (ie by 52% from2013).4 The 2016 survey shows a tendency towards slightly longer maturities of FX swaps and outright forwards. For instance, 30% of FX swaps initiated in April 2016 had a contractual maturity of between seven days and one year, compared with 26%in 2013(Table 4). Similarly, 59% of outright forwards initiated in April 2016 had a contractual maturity of between seven days and one year, compared with 56% in April 2013 3 For an analysis of investor positioning in yen FX swaps and related FX derivatives, see C Borio, R McCauley, P McGuire and V Sushko,"Covered interest parity lost: understanding the cross-currency basis", BIS Quarterly Review, September 2016 These changes have to be interpreted in the context of the surge in yen options trading in April 2013, when players such as hedge funds used the options market to express their directional views on the yen given the expansionary shift in Japanese monetary policy in April 2013: for a more detailed discussion, see D Rime and A Schrimpf(2013), op cit. Is Triennial Central Bank Survey 2016
6 BIS Triennial Central Bank Survey 2016 Foreign exchange market turnover by instrument Net-net basis,1 daily averages in April Graph 2 2001–16 USD bn 2013 2016 1 Adjusted for local and cross-border inter-dealer double-counting. Source: BIS Triennial Central Bank Survey. For additional data by instrument, see Table 1 on page 9. The US dollar continues to be on one side of 91% of FX swap transactions, a share virtually unchanged compared with previous surveys. The euro was on one side of 34% of FX swap transactions, also a virtually unchanged share since 2013. The share of the yen in total FX swap turnover rose to 19% in April 2016, compared with 15% in 2013.3 Trading activity changed unevenly in other parts of the FX OTC derivatives market. Trading volume of outright forwards rose to $700 billion in 2016, a 3% increase from $679 billion in 2013. Trading volume of currency swaps grew much faster than in any other part of the FX market, although this instrument still remains the least traded, owing in part to the long maturity of the contracts. Turnover in currency swaps rose to $96 billion in 2016, a 79% increase from $54 billion in 2013. In contrast, trading volume of FX options declined to $254 billion in 2016, 24% lower than in 2013. The largest decline took place in yen cross rates, which declined to $74 billion in 2016 (ie by 52% from 2013).4 The 2016 survey shows a tendency towards slightly longer maturities of FX swaps and outright forwards. For instance, 30% of FX swaps initiated in April 2016 had a contractual maturity of between seven days and one year, compared with 26% in 2013 (Table 4). Similarly, 59% of outright forwards initiated in April 2016 had a contractual maturity of between seven days and one year, compared with 56% in April 2013. 3 For an analysis of investor positioning in yen FX swaps and related FX derivatives, see C Borio, R McCauley, P McGuire and V Sushko, “Covered interest parity lost: understanding the cross-currency basis”, BIS Quarterly Review, September 2016 (forthcoming). 4 These changes have to be interpreted in the context of the surge in yen options trading in April 2013, when players such as hedge funds used the options market to express their directional views on the yen given the expansionary shift in Japanese monetary policy in April 2013; for a more detailed discussion, see D Rime and A Schrimpf (2013), op cit
Turnover by counterparty FX trading continued to be dominated by financial institutions other than reporting dealers, which accounted for 51%of turnover in April 2016(Graph 3 and Table 4). However, the share of trading between reporting dealers increased for the first time since 1995. Inter-dealer trading, which averaged $2.1 trillion in April 2016, increased from 39% of FX turnover in April 2013 to 42% in April 2016. The rise in inter-dealer trading was primarily driven by the increased trading in FX swaps, an 11% rise since 2013 to $1. 2 trillion in April 2016. Turnover in spot activity among reporting dealers declined in absolute terms (Table 4) 2016 to Trading between reporting dealers and other financial institutions fell slightly between 2013 and $2.6 trillion. Non-reporting banks- smaller and regional banks that serve as clients of the large FX dealing banks but do not engage in market-making- accounted for roughly 22% of global FX turnover in April 2016(Graph 3), down from a 24% share in April 2013. At the same time, institutional investors, such as insurance companies and pension funds, further increased their share of fX trading relative to hedge funds and proprietary trading firms: institutional investors were on one side of 16% of daily turnover in April 2016, up from 11%in 2013, whereas the corresponding share of FX trading by hedge funds and proprietary trading firms decreased from 11%to 8% The rise in the share of trading by institutional investors is mostly due to an increase in their use of FX swaps. Average daily FX swap turnover with institutional investors as a counterparty rose to $278 billion by April 2016(Table 5), a 79% increase compared with the 2013 survey The fall in the share of trading by non-reporting banks is primarily due to a decline in their activity in the spot market, followed by a decline in their use of FX swaps. Average daily spot turnover with non eporting banks as a counterparty stood at $354 billion in April 2016, a 30% decline compared with the 2013 survey, and average daily FX swap turnover stood at $564 billion(a 7% decline) Foreign exchange market turnover by counterparty Net-net basis, daily averages in April Graph 3 2001-16 2016 Breakdown of other financial 4.000 51% 42 Reporting dealers banks Other financlal Inaututons Hedge funds and PTFa I Adjusted for local and cross-border inter-dealer double-counting. For definitions of counterparties, see page 18. Proprietary trading firms Source: BIS Triennial Central Bank Survey. For additional data by counterparty, see Tables 4 and 5 on pages 12 and 13 BIS Triennial Central Bank Survey 2016
BIS Triennial Central Bank Survey 2016 7 Turnover by counterparty FX trading continued to be dominated by financial institutions other than reporting dealers, which accounted for 51% of turnover in April 2016 (Graph 3 and Table 4). However, the share of trading between reporting dealers increased for the first time since 1995. Inter-dealer trading, which averaged $2.1 trillion in April 2016, increased from 39% of FX turnover in April 2013 to 42% in April 2016. The rise in inter-dealer trading was primarily driven by the increased trading in FX swaps, an 11% rise since 2013 to $1.2 trillion in April 2016. Turnover in spot activity among reporting dealers declined in absolute terms (Table 4). Trading between reporting dealers and other financial institutions fell slightly between 2013 and 2016, to $2.6 trillion. Non-reporting banks – smaller and regional banks that serve as clients of the large FX dealing banks but do not engage in market-making – accounted for roughly 22% of global FX turnover in April 2016 (Graph 3), down from a 24% share in April 2013. At the same time, institutional investors, such as insurance companies and pension funds, further increased their share of FX trading relative to hedge funds and proprietary trading firms: institutional investors were on one side of 16% of daily turnover in April 2016, up from 11% in 2013, whereas the corresponding share of FX trading by hedge funds and proprietary trading firms decreased from 11% to 8%. The rise in the share of trading by institutional investors is mostly due to an increase in their use of FX swaps. Average daily FX swap turnover with institutional investors as a counterparty rose to $278 billion by April 2016 (Table 5), a 79% increase compared with the 2013 survey. The fall in the share of trading by non-reporting banks is primarily due to a decline in their activity in the spot market, followed by a decline in their use of FX swaps. Average daily spot turnover with nonreporting banks as a counterparty stood at $354 billion in April 2016, a 30% decline compared with the 2013 survey; and average daily FX swap turnover stood at $564 billion (a 7% decline). Foreign exchange market turnover by counterparty Net-net basis,1 daily averages in April Graph 3 2001–16 USD bn 2016 Breakdown of other financial institutions2 1 Adjusted for local and cross-border inter-dealer double-counting. 2 For definitions of counterparties, see page 18. 3 Proprietary trading firms. Source: BIS Triennial Central Bank Survey. For additional data by counterparty, see Tables 4 and 5 on pages 12 and 13
The fall in the share of trading by hedge funds and proprietary trading firms was due to a decline in this sector's activity in all three of the main market segments. Average daily spot turnover with hedge funds and proprietary trading firms as a counterparty stood at $200 billion in April 2016, a 29% decline compared with the 2013 survey; trading in outright forwards and FX swaps with this counterparty sector also declined, by 29% and 37%, respectively Trading with non-financial customers, such as corporations and governments, contracted, accounting for only 7% of global FX turnover, a continuation of the trend captured in previous surveys Geographical distribution of turnover Trading continues to be concentrated in the largest financial centres. In April 2016, sales desks in five countries-the United Kingdom, the United States, Singapore, Hong Kong SAR and Japan-intermediated 77% of all foreign exchange trading(Table 6). The share of foreign exchange trading taking place in the United States was virtually unchanged relative to the previous survey, at 19% in 2016. Asian financial centres, namely Tokyo, Hong Kong SAR and Singapore, increased their combined share of intermediation to 21%, from 15% The share of foreign exchange trading in the United Kingdom declined to 37% in April 2016, from 41%. The decline was broad-based across currency pairs. The market share of the euro area continued to decline, falling to 8% in April 2016 from 9% in 2013, although France maintained its 3% share. The trend decline in the share of trading activity taking place in Switzerland and Australia also continued, to 2% in each country in 2016 compared with 3% in 2013 Is Triennial Central Bank Survey 2016
8 BIS Triennial Central Bank Survey 2016 The fall in the share of trading by hedge funds and proprietary trading firms was due to a decline in this sector’s activity in all three of the main market segments. Average daily spot turnover with hedge funds and proprietary trading firms as a counterparty stood at $200 billion in April 2016, a 29% decline compared with the 2013 survey; trading in outright forwards and FX swaps with this counterparty sector also declined, by 29% and 37%, respectively. Trading with non-financial customers, such as corporations and governments, contracted, accounting for only 7% of global FX turnover, a continuation of the trend captured in previous surveys. Geographical distribution of turnover Trading continues to be concentrated in the largest financial centres. In April 2016, sales desks in five countries – the United Kingdom, the United States, Singapore, Hong Kong SAR and Japan – intermediated 77% of all foreign exchange trading (Table 6). The share of foreign exchange trading taking place in the United States was virtually unchanged relative to the previous survey, at 19% in 2016. Asian financial centres, namely Tokyo, Hong Kong SAR and Singapore, increased their combined share of intermediation to 21%, from 15%. The share of foreign exchange trading in the United Kingdom declined to 37% in April 2016, from 41%. The decline was broad-based across currency pairs. The market share of the euro area continued to decline, falling to 8% in April 2016 from 9% in 2013, although France maintained its 3% share. The trend decline in the share of trading activity taking place in Switzerland and Australia also continued, to 2% in each country in 2016 compared with 3% in 2013
