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BIS view on why FX markets are shrinking

The Bank for International Settlements (BIS) has published the December 2016 issue of the BIS Quarterly Review, which looks at data from the 2016 Triennial Central Bank Survey of foreign exchange (FX) and OTC derivatives markets.

Focus on FX

The main article – Downsized FX markets: causes and implications – in this edition of the quarterly publication looks at what is happening in global FX markets, focusing on the 2016 BIS survey.

The triennial FX survey, which is a benchmark of the global FX market, was conducted in April this year. Analysis of the survey results suggest there are three emerging themes:

  • changes in the role and composition of market participants;
  • the evolving role of emerging market currencies; and
  • monetary policy as a driver of market developments.

The survey shows that global FX turnover fell to $5.1 trillion per day in April 2016, from $5.4 trillion in April 2013. The graph below shows how the global FX markets have developed in the past decade. For the first time since 2001, global FX trading decreased between 2013 and 2016. Spot trading fell to $1.7 trillion per day in April 2016, from $2.0 trillion in 2013, while trading in most FX derivatives, particularly FX swaps, continued to grow. Some emerging market currencies also gained market share, most notably the renminbi.

The BIS Quarterly Review also included articles on the following topics:

The changing shape of interest rate derivatives markets 

Emerging derivatives markets? 

Non-deliverable forwards: impact of currency internationalisation and derivatives reform 

Does the financial channel of exchange rates offset the trade channel? 

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This item appears in the following sections:
FX Management & Crypto
Buying & Selling FX
Risk Management
FX Hedging & Risk Management

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