Steep drop in institutional Forex volume is reported

Join the iFX EXPO Asia and discover your gateway to the Asian Markets

The Foreign Exchange Committee today released the results of its tenth Survey of North American Foreign Exchange Volume.

The following dealers participated and reported a decline of over 25% in traded volumes across all instruments as well as strong signs of consolidation in that sector:

ABN AMRO

Bank of America

Bank of Montreal

The Bank of New York

Bank of Tokyo-Mitsubishi

Barclays Capital

BNP Paribas

Citigroup

Canadian Imperial Bank of Commerce

Calyon

CSFB

Deutsche Bank AG

Dresdner Bank AG

Goldman Sachs & Co.

HSBC Bank USA

JP Morgan Chase Bank

Merrill Lynch

Mizuho Corporate Bank

Morgan Stanley

Royal Bank of Canada

Royal Bank of Scotland

Skandinaviska Enskilda Bank

Société Générale

Standard Chartered

State Street Corporation

Sumitomo Mitsui Banking Corporation

UBS Bank

Wells Fargo Bank N.A.

Key findings include:

• Average daily volume in total over-the-counter foreign exchange instruments (including spot transactions, outright forwards, foreign exchange swaps, and options) totaled $527 billion, a decrease of 26.3 percent compared with the April 2008 reporting period and the lowest level since October 2005;

• Declines in average daily volume were broad based and were reported across all currency pairs, instrument types, counterparty types, and execution methods;

• Spot market transactions conducted by the top quintile of dealers based upon market share remained elevated following the rise seen in the October 2008 survey results, continuing to suggest increased market concentration over the past year.

I doubt we’ll see any similar decline in retail forex in the near future but this may be a likely scenario in the long term. Institutional forex trading reached its maturity long time ago so this decline amid the financial crisis is not a big surprise.

Summary of the survey is embedded below for your convenience.

The Foreign Exchange Committee released the results of its tenth Survey of North American Foreign Exchange Volume –