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FX Turnover

I have in the past been asked by new traders what is the most liquid market in the world. The reason they asked was they were generally concerned that the massive size of their account (always less than 100k) was too big for any market other than the most liquid.

So to put them at ease here are the latest findings from Triennial Central Bank Survey – Report on global foreign exchange market activity in 2010.

Turnover in April 2010

Global foreign exchange market turnover was 20% higher in April 2010 than in April
2007, with average daily turnover of $4.0 trillion compared with $3.3 trillion. The
increase was driven by the 48% growth in turnover of  spot transactions, which
represent 37% of foreign exchange market turnover. Spot turnover rose to
$1.5 trillion in April 2010 from $1.0 trillion in April 2007.

The increase in turnover of other foreign exchange instruments was more modest at
7%, with average daily turnover of $2.5 trillion in April 2010. Turnover in outright
forwards and currency swaps grew strongly (by 31% and 36%, respectively).
Turnover in the large foreign exchange swaps segment was flat relative to the
previous survey, while trading in currency options fell.

As regards counterparties, the higher global foreign exchange market turnover is
associated with the increased trading activity of “other financial institutions” – a
category that includes non-reporting banks, hedge funds, pension funds, mutual
funds, insurance companies and central banks. Turnover by this category grew by
42%, rising to $1.9 trillion in April 2010 from $1.3 trillion in April 2007. At 13%, the
share of trading with non-financial customers was the lowest since 2001.

Foreign exchange market activity became more global, with cross-border
transactions representing 65% of trading activity in April 2010, while local
transactions accounted for 35%, the lowest share ever.

The relative ranking of foreign exchange trading centres has changed slightly from
the previous survey. Banks located in the United Kingdom accounted for 37% of all
foreign exchange market turnover, against 35% in 2007, followed by the United
States (18%), Japan (6%), Singapore (5%), Switzerland (5%), Hong Kong SAR (5%)
and Australia (4%).

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