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Brazilian Forex Traders And The Global Market: Strategic Insights – The triennial central bank survey is the most comprehensive source of information on the size and structure of global over-the-counter (OTC) markets in foreign exchange (FX) and interest rate derivatives. The survey aims to increase the transparency of over-the-counter markets, help central banks and market participants monitor global financial markets, and enrich discussions about reforms in over-the-counter markets.
Activity in foreign exchange markets has been surveyed every three years since 1986, and in OTC interest rate derivatives markets since 1995. The triennial survey is coordinated by the Markets Committee (for the foreign exchange portion) and the Global Finance Committee. The system (for the interest rate derivatives part). It has been supported by the Data Gaps Initiative endorsed by the G20.
Brazilian Forex Traders And The Global Market: Strategic Insights
This statistical release relates to the foreign exchange turnover portion of the 2022 Triennial Survey conducted in April and involved central banks and other authorities in 52 jurisdictions (see page 15)1. They collected data from more than 1,200 banks and other merchants and reported national totals for inclusion in the global totals. Turnover data is reported by the sales offices of the reporting dealers, regardless of where the trade is executed, and on a non-consolidated basis, ie including deals between related entities that are part of the same group.
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Data is subject to review. Final sales data, as well as the many special features it analyzes, will be released with quarterly review in December 2022. A separate survey on amounts due as of June 2022 will be published in November 2022.2
Turnover in OTC FX markets averaged $7.5 trillion per day in April 2022 (Chart 1, left panel, Table 1).4 Growth of 14% since the April 2019 survey ($6.6 trillion per day) was the lowest of all Three years at all except for two surveys since 2004.5 And this was despite data collection coinciding with increased currency exchange rate volatility due to changing expectations about the path of future interest rates in major advanced economies, higher commodity prices and geopolitical tensions in the aftermath of the Russian invasion of Ukraine. Meanwhile, COVID-19 restrictions applicable in many jurisdictions, including China and Hong Kong SAR, may have suppressed turnover.
Trading in spot transactions and forex swaps continued to make up the bulk of the forex trading volume. At $2.1 trillion per day in April 2022, the trading volume in the spot FX markets accounted for 28% of global trading volume (all instruments), a slightly lower share compared to 2019 (Chart 1). For its part, foreign exchange swaps, which are usually short-term instruments (up to seven days; Table 2) used by market participants to manage financing liquidity and hedge currency risks, remained the most traded instrument, with a turnover of $3.8 trillion per day. Its share in global trading volume increased to 51% from 49% in 2019 and 47% in 2016. The share of trading in outright futures contracts remained unchanged at 15% of global trading volume in the 2022 survey. FX options sales accounted for 4% of Total global sales, currency swaps 2%. The latter usually have longer maturities than direct FX swaps or forward contracts, and therefore lower turnover.
The 2022 survey introduced new dimensions to better define “market-facing deals,” ie dealings with customers and other unrelated entities that shape prices in the market. Specifically, the survey separates “non-market facing” deals consisting of (i) “cascading” deals, which are deals that automatically follow deals with customers to shift risk across sales offices; and (ii) squeeze trades, where traders improve their investment portfolios by replacing existing contracts with new ones to reduce notional amounts while keeping net exposures unchanged. by counterparty sector or currency).
The Evolution Of The Fx Swaps Market
In total, the value of indirect trading in the market amounted to $895 billion, or 12% of the total global foreign exchange trading volume of $7.5 trillion in 2022. And across instruments, it accounted for 8% of the spot trading volume, and 14% of foreign exchange swaps. And 12% of direct transactions. forward (Fig. 2).
The growth in trading volumes between 2019 and 2022 reflects increased trading between dealers. Inter-dealer trading accounted for 46% of global FX trading volume (Chart 3) in 2022, up from 38% in 2019. Another breakdown by instrument shows that inter-dealer trading accounted for 40% of spot trading volume and 54% of spot trading volume. Forex trading. trade-off (Table 2). This rise in inter-dealer trading may reflect the higher volatility in the currency markets in April 2022. During these periods, inventory imbalances arising from deals with clients are more difficult to manage, creating the need to offload them more frequently in between dealers. market. Inventory imbalances may also be passed between subsidiaries of the same intermediary bank, leading to increased cross-border and related party trades (Table 3).
By contrast, the volume of trading with “other financial institutions” — the group of clients that includes non-reporting banks, hedge funds and private trading firms, institutional investors and formal sector financial institutions — changed little between 2019 and 2022. $3.6 trillion per day in April 2022, and sales of this sector accounted for 48% of total global sales, down from 55% in 2019.
Within the ‘Other Financial Institutions’ client group, trading with non-reporting banks, consisting mainly of smaller regional banks, remained dominant (Chart 3, right panel). Average daily trading volume with this sub-sector was $1.6 trillion (Table 3) or 22% of global trading volume in 2022, down from 24% in 2019. Similarly, trading with institutional investors decreased in relative terms for the third survey period over respectively. At $847 billion per day in 2022, its share in global forex turnover fell to 11% from 12% in 2019 and 16% in 2016. Trading with hedge funds and ETFs even in absolute terms fell over this period, from $593 billion. dollars to 514 billion dollars. Or 7% of the total turnover.
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The share of trading with non-financial clients continued its downward trend. It accounted for 6% of the total FX market trading volume in 2022, down from 7% in 2019 and 9% in 2013.
The US dollar remained the dominant auto currency in the world. It was on one side of 88% of all trades in April 2022, unchanged from the previous poll (Chart 4 and Table 4).
The next three most traded currencies – the euro, the Japanese yen and the pound sterling – kept their relative rankings. The euro continued to be the second most traded currency in the world, accounting for 30.5% of all trades in April 2022 (down slightly from 32% in 2019). The Japanese yen and the British pound were to one side with 17% and 13% of all trades, respectively, almost unchanged since the 2019 survey.
The Chinese renminbi showed the largest increase in market share since the 2019 survey, being on one side of 7% of all trades in 2022 (up from 4% in 2019). As a result, the renminbi became the fifth most traded currency, after it was ranked eighth three years ago.
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Some other currencies have also experienced relatively large market share changes. While the Hong Kong dollar remained the ninth most traded currency, its share in global foreign exchange sales volume decreased from 3.5% in 2019 to 2.6% in 2022. In contrast, shares of the Canadian dollar and the Singapore dollar rose significantly.
Forex trading is still concentrated in major financial centers. In April 2022, sales offices in five locations – the United Kingdom, the United States, Singapore, the Hong Kong SAR and Japan – brokered 78% of all foreign exchange trading (Table 6, “net gross” basis). The most important forex trading site globally, with 38% of global trading volume (up from 43% in 2019).
While the ranking of major trading centers has remained unchanged since the 2019 survey, there have been changes in their relative shares in global trading volume. The share of US-reported trading rose from 17% to 19%. Activity growth varied among the leading Asian financial centres. Trading volume in Singapore grew at a higher rate than the world total, while in Hong Kong SAR and Japan it grew more slowly. Thus, trading volume in Singapore rose to 9% of global trading volume in 2022, from 8% in 2019, while in the Hong Kong SAR it fell to 7% from 8%, and in Japan to 4% from 5%. 9
The share of cross-border trading in total forex trading volume was 62% in April 2022, up from 56% in 2019 and closer to the 65% share in 2016 (Table 2). Among reporting traders more specifically, the largest portion (68%) of the $3.5 trillion per day was in cross-border Agent trading (Table 3).
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, compiled with data from 12 major jurisdictions covering an estimated 90% of the global total. Every three years, additional data from all participating jurisdictions are included in the triennial survey.
3 Figures are corrected on a “network” basis for double counting between domestic and cross-border agents. Figures are corrected on a “net gross” basis for double counting between domestic agents only.
4 Exchange rate movements between 2019 and 2022 had a slight impact on the growth of average daily trading volume (Table 1). The growth was also similar to that that can be gleaned from the more frequent regional surveys administered by local foreign exchange commissions (FXCs) in Australia, Canada, Hong Kong SAR, London, New York, Singapore and Tokyo. There are some methodological differences between the triennial survey and these surveys. Most importantly, the Triennial collects data
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