Thomson Reuters’ November FX Volumes Rebound Slightly, Volatility Flattens

Thomson Reuters (NYSE:TRI), a leading FX electronic communications network (ECNs), reported its monthly trading volumes for November 2017. The latest figures were reflective of several market factors, including more stagnated activity and Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term.

A quick ocular assessment of Thomson Reuters’ FX volumes indicates a growing level of activity in November. However, this increase was relatively minor and came in spite of compressed market activity, namely due to a lack of drivers. Moreover, US tax reform hung as a specter over global markets, given its respective impact on the USD.

As such, the wait-and-see approach towards landmark tax reform in the US managed to lead to lower industry volumes overall. Another factor to watch moving into year-end is the bullishness of stock markets leading to an overall decline in volatility.

In terms of November 2017, Thomson Reuters’s average daily volume (ADV) of its FX products, including spot, forwards, Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term options and non-deliverable forwards (NDF), came in at $397.0 billion. This figure was up a tepid 1.8 percent month-over-month from $390.0 billion in October 2017. The past few months have represented some of the least volatile periods of the year, as 2017 continues to be characterized by isolated pockets of activity in markets.

In particular, of Thomson Reuters’ total ADV, $94 billion was attributed to FX spot in November, scoring an increase of 3.3 percent on a monthly basis. These volumes have been unable to match an earlier 2017 peak of $103 billion in September.

Factoring out FX spot, other transaction types, including forwards, swaps, options and NDFs, averaged $303 billion per day in November, marginally up from $299 billion in October. The overall static nature of the volumes and lack of any broader moves is on par with its counterparts in the industry.

Earlier this month, other FX venues saw similar moves in their volumes, which were heavily influenced by compressed volatility. Looking ahead to December, a quick and decisive push tax reform in the US looks likely, which could easily drive markets leading into the new year.

As has been the case for much of 2017, ongoing political scandals continue to take center stage with Mueller’s investigation potentially being a wildcard. Markets will continue to stay abreast of these developments as they harbor large repercussions for the USD.