Is this a trend?

BATS Hotspot Trading Volumes Tick Lower in May Amid Low Volatility

The electronic marketplace has retained higher figures when compared to last year, however the trend remains on a downward trajectory

May has been a month of subdued activity on the electronic foreign exchange marketplace, Hotspot FX. The company reported that the average daily trading volumes totaled close to $26.8 billion as the volatility in major pairs declined somewhat when compared to April. The figure is almost 6 percent lower when compared to the previous month but remains higher than a year ago.

After a substantial decline registered in April, this marks the second consecutive month of declines in trading activity on this leading electronic foreign exchange marketplace.

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While the U.S. dollar recovered some of the lost ground towards the latter part of the month, uncertainty has dominated the foreign exchange market. Traders are puzzled as to when and if the the Federal Reserve is to lift off interest rates from the current historic low levels.

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While a number of analysts have expressed their opinion that the U.S. central bank could move in June, those projections have been scaled back due to the recent economic weakness. Currently, the consensus estimate is for the Fed to move after the summer months, however, depending on the data the move could be postponed once more.

BATS Hotspot undertook some aggressive pricing initiatives in recent months, including offering free spot gold trading for clients on the electronic marketplace. Meanwhile, competing solutions on the market from EBS have been gaining traction in recent months after some changes to the product offering and the merging of ICAP’s ECN with BrokerTec.

While two consecutive monthly declines do not represent a trend, the figures are likely to lead to some speculation about the state of the foreign exchange market. As we get closer and closer to the typically quieter summer months, trading volumes are already substantially lower than during the two previous quarters.

With the uncertainty of a Fed rate hike likely to remain with us for a period of time, volatility could continue stagnating.

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