London retains top share of $6.6 trillion global currency markets amid US decline

Global currency markets reach $6.6 trillion as share in the UK increases, but turnover in the US declines, according to BIS triennial FX survey.

London has retained its place as the global hub for currency trading while the share of FX trading taking place in the US declined, as trading in the global market reached $6.6 trillion per day in April this year.

According to the Bank for International Settlements (BIS) triennial survey on turnover in OTC FX markets, trading in global markets per day increased from $5.1 trillion per day three years ago, fuelled by strong growth in FX derivatives trading, particularly FX swaps.

The survey found that while the share of currency trading taking place in the US declined from 20% in 2016 to 17% in 2019, the UK strengthened its position as the leading FX trading hub globally as its share of FX trading increased to 43% in April this year, despite the spectre of Brexit.

“While New York’s overall market share as a trading hub has slipped, London has increased and reinforced its position the world’s pre-eminent FX hub,” chief executive of interdealer broker ParFX, Dan Marcus, commented on the results. “This is testament to London’s long-standing global trading relationships, concentration of counterparties and continued investment in technology infrastructure. From a foreign exchange perspective, there is no doubt that London remains a global centre of excellence.”

At the same time, the share of FX trading taking place in Asia decreased slightly to 20% over the same period due to a slowdown of activity in Singapore and Tokyo. However, currency trading in China saw a surge in activity to $136 billion in 2019, up a significant 87% from three years prior.

Matthew Hodgson, CEO and founder of FICC data analytics firm Mosaic Smart Data, also commented that the growth in FX derivatives revealed by the survey marks a challenge for participants in terms of risk and data handling.

“These more complex instruments bring with them their own challenges – especially when it comes to managing and monitoring price and risk. The FX markets still lack standardised messaging or a central ticker, making it difficult for market participants to understand what is going on across their own FX business,” Hodgson said.

“The FX markets are already the most liquid in the world, creating a huge data challenge. If we’re going to see these growth trends continue, data handling and analytics systems are going to need to evolve to keep pace.”