May was a challenging month for institutional foreign exchange (FX) markets. After a period of relative stability, trading volumes across major platforms, including Cboe, FXSpotStream, TFX, Euronext, and Fastmatch’s 360T, experienced a steep decline compared to the April highs.

This downturn surprised many market participants, especially given the unchanged number of trading days compared to previous months. What caused such a dramatic drop in institutional FX volumes? Let's break down the numbers and examine the factors behind this shift.

Why Did Institutional FX Volumes Fall?

Several factors contributed to the sharp decline in FX trading activity in May 2025. Market volatility remained subdued, with fewer macroeconomic catalysts to spur trading.

Uncertainty over central bank policies, particularly from the Federal Reserve and Bank of Japan, led to a “wait-and-see” approach among institutional players. Additionally, the absence of major geopolitical events or economic data releases kept traders on the sidelines, resulting in lower turnover across the board.

In April, markets were shaken by Donald Trump’s unexpected trade war rhetoric and threats to impose tariffs on a wide range of countries. The U.S. dollar fell nearly 4.4% against a trade-weighted basket of currencies, its steepest monthly decline in three years, fueling volatility and a surge in trading activity.

By contrast, in May, the dollar’s drop was limited to just 0.2%, which led to a notable pullback in institutional FX volumes, as illustrated by the examples below.

US Market Activity Hit Multi-Month Lows

The US-based Cboe exchange saw a notable decrease in both total FX volumes and average daily value (ADV) during May. Despite having the same number of trading days as April, Cboe’s total turnover settled at $1.06 trillion, marking the lowest level since February.

Daily trading volumes also slipped, reaching just under $48 billion, a three-month low. While these figures may seem discouraging, it’s important to note that year-on-year comparisons remain positive.

In May 2024, Cboe’s total FX volume was $971 billion, with an ADV of $42 billion, indicating that the market has grown over the past year, even if the recent monthly trend has been negative.

Steepest Decline in Japan

The Tokyo Financial Exchange (TFX) experienced an even more dramatic contraction on its Click 365 FX platform. In May, monthly trading volumes plunged by nearly 37% to 1.43 million contracts, with the average daily volume falling to 65,000 contracts. Compared to the same period last year, this represents a staggering 41% decrease.

The USD/JPY currency pair, which remains the core driver of activity on the platform, saw a pronounced drop in trading. Volume for this pair alone fell 32% month-over-month and 20% year-over-year.

Across all major traded markets on TFX, there was no month-on-month growth, highlighting the widespread nature of the slowdown.

FXSpotStream: First Sub-$100 Billion ADV in Months

FXSpotStream also reported a significant dip in activity. For the first time since December 2024, its average daily volume (ADV) fell below $100 billion. The total ADV contracted from $122 billion in April to just under $99 billion in May.

While other ADV components remained steady at $31 billion, spot ADV saw a more pronounced decline, shrinking from $91.4 billion to $68 billion. This drop underscores the broad-based nature of the slowdown affecting both spot and other FX products.

Significant Contraction in Europe

Euronext was not immune to the broader market malaise, with its FX trading volumes experiencing a substantial contraction. In May, total volumes fell to $719.8 billion, down from $893.1 billion reported in April.

The average daily volume also decreased, moving from $37.2 billion to $32.7 billion. This decline reflects a general reluctance among institutional players to engage in the market amid low volatility and limited trading catalysts.

Moreover, Fastmatch’s 360T platform posted the weakest results among major FX venues in May. Total turnover plummeted to $605.1 billion, a sharp fall from the nearly $871 billion reported the previous month.

The average daily volume also suffered, dropping from almost $40 billion in April to just $27.5 billion in May.

With volatility at a low ebb and few significant economic or geopolitical events to spur trading, institutions largely chose to remain on the sidelines.