Daily FX Trading Activity: $4.7 Trillion

Tyler Durden's picture

Over the weekend, the BIS released its latest quarterly review of financial organizations, which despite being chock full of assorted data, merely summarizes what banks already report to the public and to various regulators. As such, it completely avoids the potentially black swan areas, such as derivative, off-balance sheet and shadow banking exposure. In other words, it is largely a waste of time. One section, however, that is useful,is the analysis by Morten Bech on "FX volume during the financial crisis and now" which has created a constant time series to evaluate FX trading volumes all the way through October 2011, as opposed to the traditional BIS Triennial survey, the next of which is due in April 2013. Morten's finding: "I estimate that in October 2011 daily average turnover was roughly $4.7 trillion based on the latest round of FX committee surveys."

"Moreover, I find that FX activity may have reached $5 trillion per day prior to that month but is likely to have fallen considerably into early 2012. Furthermore, I show that FX activity continued to grow during the first year of the financial crisis that erupted in mid-2007, reaching a peak of just below $4.5 trillion a day in September 2008. However, in the aftermath of the Lehman Brothers bankruptcy, activity fell substantially, to almost as low as $3 trillion a day in April 2009, and it did not return to its previous peak until the beginning of 2011. Thus, the drop coincided with the precipitous fall worldwide in financial and economic activity in late 2008 and early 2009." $4.7 trillion a day - surely a whopper of a number, but the fact that it is declining is merely the latest confirmation that having departed equity markets, and pushing liquidity in fixed income to period lows, investors and speculators are now vacating this last bastion of levered trading, courtesy of central banks having taken over not only bonds and stocks, but now Mrs. Watanabe's favorite market as well.

Here is how the BIS defines the various foreign exchange instruments:

FX volume surveys report turnover by instrument. Instrument types include the following:

Spot transactions are single outright transactions that involve the exchange of two currencies at a rate agreed to on the date of the contract for value or delivery within typically two business days.

Outright forwards involve the exchange of two currencies at a rate agreed to on the date of the contract for value or delivery at some time in the future. This category also includes forward foreign exchange agreement (FXA) transactions, non-deliverable forwards (NDFs) and other forward contracts for differences.

Foreign exchange swaps involve the exchange of two currencies on a specific date at a rate agreed to at the time of the conclusion of the contract, and a reverse exchange of the same two currencies on a future date at a rate agreed to at the time of the contract. For measurement purposes, only the long leg of the swap is reported, so that each transaction is recorded only once.

Currency swaps involve the exchange of fixed or floating interest payments in two different currencies over the lifetime of the contract. Equal principal based on the initial spot rate is typically exchanged at the beginning and close of the contract.

Currency or foreign exchange options are contracts that give the right to buy or sell a currency with another currency at a specified exchange rate during or at the end of a specified time period.



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GetZeeGold's picture



Word up dog......I hear it was exponential.



Sudden Debt's picture

I wonder how many "soft patches" they ever had...


GetZeeGold's picture



Hard to tell.....the soft patches were covered over by the green chutes.


lineskis's picture

Too bad there's no "gold/whatever fiat" pair, could be fun trading this...

Sunshine n Lollipops's picture

Or a Charmin/USD pair. Pretty sure I'd be long Charmin.

Manthong's picture

 "FX volume during the financial crisis and now"

Well at least they got all that "financial crisis" stuff out of the way and "now" everything is just fine.

JennaChick's picture

Majors moves going to take place in the FX market. According to Armada Markets latest weekly market forecast we should all start digging bomb shelters.

TheFourthStooge-ing's picture

Still shilling for Ingmar and armadamarkets? BTW, giving yourself a green up arrow is lame, but I wouldn't expect anything different from a shill/spammer.


ndotken's picture

"I'll give you one piece of my toilet paper for 1.3115 pieces of your toilet paper."

Schmuck Raker's picture

Thanks Tylers

We can always rely on you guys to extract the useful bits for us.

Dr. Richard Head's picture

Daily currency trades used to be $3 Trillion, so an increase of $1.7 Trillion (56% increase) is a good thing according to monitorists out there.  Of course, those numbers are just what is contained on the balance sheet.  Those off-balance currency trades in dark pools don't count. 

By the way, it's those damn muslims causing gas prices to spike.  It has NOTHING to do with all of that fucking fiat sloshing around central banks and their pet primaries.  Move along people.  Financial games are too intricate for you commoners to understand.

sampo's picture

Fx volumes are peanuts compared to the silver volumes with respect to supplies.

gold-is-not-dead's picture

is it me, or this chart correlates to the price of gold?

Central Bankster's picture

No one wants to trade rigged bond and stock prices, so they choose rigged currencies instead?