Daily foreign exchange trading volume in the United States has hit $351 billion this year, a 43% jump from three years ago, according to a study by the Federal Reserve Bank of New York.
The 13% annualized growth in foreign exchange trading remains unchanged from the annual increase reported in a 1992-1995 survey, the study said. However, foreign exchange trading shifted heavily in favor of swaps and away from spot trades.
Turnover in the foreign exchange swap market doubled, to $166 billion a day, or 47% of total turnover, while spot market trading decreased to 42% of the total, from 55% in 1995.
The U.S. foreign exchange survey used information supplied by 102 U.S. and foreign banks, investment banks, and brokerage firms. Daily trading volume for each year was calculated using daily numbers from April.
Though almost all banks are involved in foreign exchange trading, the business is largely dominated by U.S. money-center banks such as Citicorp, Chase Manhattan Corp., and BankAmerica Corp., and a few European banks such as Deutsche Bank and ABN Amro.
Though the report did not identify the top firms in foreign exchange trading, it noted that five institutions accounted for 31% of turnover.
Among the survey's other findings:
Trading in foreign exchange and interest rate derivatives rose steeply, by 75%, to $91 billion.
Turnover in European currencies such as the Austrian schilling, Belgian franc, Danish krone, Spanish peseta, Finnish markka, and Portuguese escudo, along with emerging market currencies such as the Thai baht and Argentine peso, more than doubled since the previous survey.
Turnover in emerging market currencies more than doubled to $23 billion a day, from $10 billion in 1995, with the Mexican peso the most heavily traded currency. Turnover in other European Union currencies more than doubled to $35 billion, from $16 billion in 1995.
The U.S. dollar remained the most actively traded currency, accounting for 90%, or $315 billion worth of turnover. The German mark accounted for $122 billion worth of trades, followed by the Japanese yen with $86 billion, other European Union currencies with $41 billion, the British pound with $36 billion, and the Swiss franc with $31 billion.
Electronic brokerage, or turnover through automated order-matching systems, increased more than threefold from the previous survey, to $47 billion.
The survey is conducted every three years by central banks from 44 countries and is coordinated with the Basel-based Bank for International Settlements.