What BIS and EuroMoney surveys can tell us about the Forex Market?

Have you ever heard of BIS? BIS stands for Bank of International Settlement. The BIS is based in Basel, Switzerland and acts as a custodian for the world’s central banks.  Once every three years, the BIS conducts a survey of its central bank clients regarding currency trading activity in their country. The first survey was conducted in 1986, with four countries taking part. Now the number of participating central banks is over 50.  The latest survey from April 2019 shows the acceleration of the Forex market turnover.  After a slight decrease in 2016, the daily average volume reached 6.6 trillion dollars. 

Forex Market Turnover

The BIS also reports activity by instrument type. FX Swap contracts account for 49% of the volume. Basically, the half of the volume are Swap transactions while the Forex Spot transactions account for 30%.

Forex market share by instrument type

FX trading continues to be concentrated in the largest financial centers. The share of trading taking place in the United States declined to 17% in 2019. In contrast, the share of the United Kingdom rose by 6 percentage points to 43% of global FX activity in April 2019. So, we could definitely say that London is the capital of the Foreign Exchange Market.  Several other FX trading centers also gained in share. In particular, mainland China recorded a significant rise in trading activity - an 87% increase since 2016. 

The US dollar remained the world’s dominant vehicle currency. It was on one side of 88% of all trades in April 2019. The relative ranking of the next seven most liquid currencies did not change from 2016. Turnover in the euro, the world’s second most traded currency, increased at a somewhat higher rate than did the aggregate market, and its share in global trading edged up to 32%. This reflected higher than market average growth in EUR/JPY and EUR/CHF trading. In contrast, JPY turnover stagnated, and the yen’s share in global turnover dropped by 5 percentage points, to 17%. Despite this decline, the yen remained the third most traded currency globally. The fall in JPY turnover was mostly due to a contraction in the important JPY/USD cross amid low volatility. 

Forex market share by currency pair

The market shares for other heavily traded advanced economy currencies in April 2019 were unchanged from their 2016 values, with the GBP at 13%, the AUD at 7%, the CAD at 5% and the CHF at 5% of global FX turnover. Renminbi trading increased to 4.3%. 

If you are interested in more detailed statistics, please have a look at the full report on the website of the Bank of International Settlement

Another report that I would like to review in this article is the EuroMoney Survey. The Euromoney magazine releases an annual foreign exchange survey and it’s the most comprehensive annual study available on the FX markets.  

Euromoney received around 2000 responses from consumers of FX liquidity. It’s a liquidity consumption survey.   Respondents are asked to name their (up to) top 20 dealers by volume ($m) and the total volume they traded over the last year. 

Unfortunately, the report is not freely available and it’s quite expensive. However, the Euromoney publishes the summary of the report that you can see below.  The summary contains a table with top 10 largest FX companies. 

Global market share
Rank 2020 Rank 2019 Counterparty Market Share % 2020
1 1 JPMorgan 10.78%
2 5 UBS 8.13%
3 4 XTX Markets 7.58%
4 2 Deutsche Bank 7.38%
5 3 Citi 5.50%
6 8 HSBC 5.33%
7 11 Jump Trading 5.23%
8 10 Goldman Sachs 4.62%
9 6 State Street 4.61%
10 9 Bank of America 4.50%

We can observe that the Forex market is still highly concentrated around largest banks but some electronic trading venues like XTX Markets and Jump Trading rapidly gain market share.