Nearly Half of $7.5T Daily Forex Transactions Take Place in London

<p>The UK forex
market is doing well, according to the latest edition of the survey conducted
annually by the Bank of England. The average daily reported UK FX turnover
(ADV) was $2.928 trillion in October 2023, a visible increase from the $2.844
trillion recorded a year earlier.</p><p>FX Turnover Up 3% From
April 2023</p><p>This week,
the Foreign Exchange Joint Standing Committee (FXJSC) released the results of
its latest semi-annual survey of turnover in the UK foreign <a href="https://www.financemagnates.com/terms/e/exchange/">exchange</a> market.
The survey, conducted in October 2023, showed continued growth in the UK FX
market.</p><p>The October
turnover figure represents a 3% increase year-over-year (YoY) from October
2022. As is typical for these surveys, the October turnover figure was lower
than the preceding April. This is attributed to seasonal trends in trading
activity. In April 2023, the volume reached $3.117 trillion, which is 3% higher.</p><p>Although
the report aligns with the data from the survey published every three years by
the Bank for International Settlements (BIS), there's one thing worth noting.
The latest BIS report appeared <a href="https://www.financemagnates.com/institutional-forex/fx-trading-has-become-a-75-trillion-adv-market-london-losing-steam/" target="_blank" rel="follow">in October 2022</a>, showing that the ADV of the
global FX market is $7.5 trillion. </p><p>More
importantly, for the FX market itself, it suggested at the time that it was
losing some market significance, especially after Brexit, in favor of the USA
and Singapore. London remains the largest player. However, its share in
transactions fell from 43% <a href="https://www.financemagnates.com/institutional-forex/execution/bis-survey-daily-fx-volumes-jump-30-to-6-6-trillion-in-2019/" target="_blank" rel="follow">reported in 2019</a> to 38% in 2022.</p><p>Top Currency Pairs Stable</p><p>The top
three currency pairs by trading volume – EUR/USD, GBP/USD, and USD/JPY –
retained their positions from April. These three pairs have held the top spots
since the survey began tracking turnover in 2008. The EUR/USD pair remained the
most actively traded in London at $738 billion average daily volume, accounting
for 25% of total turnover.</p><p>Similar FX
turnover surveys conducted concurrently in other global financial centers like
New York, Tokyo, Singapore, Hong Kong, and Sydney showed comparable results
over the last year. This indicates broadly growing activity across FX trading
hubs, likely spurred by the same macroeconomic conditions and uncertainty.</p><p>Growth Driven by Spot
Trading</p><p>The growth
in turnover was driven primarily by increased spot trading, while FX swaps saw
a decrease in share. FX spot trading made up 29% of total turnover in October,
up from 27% in April. </p><p>Meanwhile,
FX swaps accounted for 46% of turnover, down from 49% in April. This indicates
a shift toward more short-term trading activity. Turnover in other instruments,
such as forwards and options, remained steady.</p><p>The October
2023 figures show the continuation of a long-term growth trend in UK FX market
turnover. Total turnover has increased 73% from $1.697 trillion in October
2008. Recent turnover growth aligns with greater currency price <a href="https://www.financemagnates.com/terms/v/volatility/">volatility</a>
driven by events like Russia's invasion of Ukraine, rising interest rates, and
inflationary pressures. The full impact of these events on trading activity is
still developing.</p><p>The FXJSC
semi-annual turnover survey has been conducted since 1973. It provides a
snapshot of activity in the UK wholesale FX market based on volumes reported by
participating financial institutions. The October 2023 survey included data
from 27 institutions, comprising banks, brokers, infrastructure providers, and
public authorities.</p>

This article was written by Damian Chmiel at www.financemagnates.com.