The 2004 triennial central bank survey of foreign exchange and derivatives market activity by the Bank for Interna-tional Settlements (BIS) revealed a big hike in FX turnover. Average daily turnover in traditional FX markets, including spot, forward and FX swap markets, in April 2004 was $1900bn. This is a 57% increase measured at the exchange rates when the BIS report was released (in March) and a 36% rise at constant exchange rates compared with April 2001, the date of the last report. This substantial rise, particularly in the spot and forward markets, more than reversed the fall in global trading volumes that occurred between 1998 and 2001.
In the face of razor thin margins, continued consolidation and the inexorable move to electronic delivery, the FX business continues to grow. The growth is driven, at least in part, by investors’ interest in FX as an asset class alternative to fixed income and equity markets and the increasingly active participation of asset managers, particularly hedge funds.
