The Foreign Exchange Committee has released the results of its fourth Survey of North American Foreign Exchange Volume. For this April 2006 reporting period, it was found that the average daily volume in over-the-counter foreign exchange instruments (including spot transactions, outright forwards, foreign exchange swaps, and options) totaled $577 billion. The average daily volume of these instruments increased 31.5 percent over that of the April 2005 reporting period, led by a 66.4 percent rise in forward transactions, and increased 21.1 percent over that of the October 2005 reporting period.
“We continue to see accelerating growth in foreign exchange volume, and this survey provides important insight into the composition of this volume,” says Mark Snyder, Chair of the Foreign Exchange Committee. “Average daily volume is up nearly a third over the past year, and the survey results show a strong increase in electronic trading volume as a percentage of the total. The survey results highlight the relevance of the best practice recommendations published by the Foreign Exchange Committee in June 2006 for participants involved in the electronic trading and autodealing environment.”
The survey was developed in order to provide the market with frequent information on the size and structure of foreign exchange activity in North America. To achieve a representative survey, the Committee invited thirty-one leading financial institutions active in the North American foreign exchange market to contribute data on the level of turnover during the month of April 2006. The Committee also collaborated with the United Kingdom’s Foreign Exchange Joint Standing Committee (FXJSC), the Singapore Foreign Exchange Market Committee (SFEMC), the Canadian Foreign Exchange Committee (CFEC) and the Tokyo Foreign Exchange Market Committee (TFEMC), which conducted similar surveys for their own markets over the same time period. The FXJSC, the SFEMC and the CFEC are releasing their survey results on 17th July, and the TFEMC is releasing their survey results on 18th July.
For the purposes of the survey, turnover is defined as the gross value of all new deals entered into during the reporting period and is measured in terms of the notional amount of the contracts. Survey data is broken out by four foreign exchange instruments, thirteen currency pairs, four counterparty types, and five execution method categories and is reported both in terms of daily average and total monthly volume. The reporting basis for the survey is the location of the price-setting dealer. While similar in nature, the survey is not comparable to the Bank for International Settlements’ Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity, given differences in the reporting methodology. The Foreign Exchange Committee includes representatives of major domestic and foreign commercial and investment banks engaged in foreign exchange transactions in the United States, as well as foreign exchange brokers. The Committee has three main objectives. It aims to serve as a forum for the discussion of best practices and technical issues in the foreign exchange market. It encourages improvements in risk management in the foreign exchange market by offering recommendations and guide lines. It also looks to enhance the legal certainty of foreign exchange contracts through the development of standard documentation.