The Bank for International Settlements (BIS) in Basel, Switzerland, is the official “record keeper” for the central banks of the world. Every three years, in December, the BIS issues a report called the Triennial Central Bank Survey, which reports metrics in the foreign exchange market gathered during that year. The most recent Surveys were released in December of 2004, 2007, and 2010. The next Survey will be released about December 10 of this year.
Each Survey reports on turnover in the foreign exchange (FX) market during the month of April in the Survey year; and on amounts outstanding in the foreign exchange OTC derivatives markets as of June 30 in the Survey year.
The data of interest to us, as retail forex traders, is the turnover data gathered in April. Turnover is the term used by the BIS to describe transaction volume in specific currencies, in specific currency pairs, among specific counterparties, and in the overall FX market.
In September of each Survey year, the BIS issues a Preliminary Global Results Survey, which serves as a preview of the full Survey coming in December. The September 2013 Preliminary Survey has just been released.
The Preliminary Survey released in September reports on FX market turnover, only. A separate Preliminary Survey on amounts outstanding in the OTC derivatives markets will be issued in November. Revisions to both Preliminary Surveys are possible, before the final Survey is issued in December.
FX Market Turnover
If you’ve heard that the FX market is a $4 trillion per day market, and you’ve wondered where that number comes from — the answer is the BIS [U]2010[/U] Triennial Central Bank Survey. And now, that number is 3 years old, and out of date.
The 2013 Preliminary Survey reports that the overall FX market has grown from $4 trillion/day to $5.3 trillion/day over the past 3 years — a 33% increase. This $5.3 trillion/day volume figure represents the notional value of all the world’s foreign exchange trading, as tracked and averaged during the month of April 2013.
To put this figure into perspective, $5.3 trillion/day is roughly 27 times the total daily output of goods and services for the entire world (based on estimated world GDP of $71.83 trillion/year, as reported in the CIA World Factbook). The foreign exchange market is the largest market in the world, in terms of transaction volume (turnover).
That $5.3 trillion/day worldwide total is comprised of: spot forex (institutional spot forex and retail spot forex) plus 4 categories of foreign exchange OTC derivatives (outright forwards, foreign exchange swaps, currency swaps, and options and other instruments).
Spot forex is the segment of the total market that we are a (tiny) part of. And the 2013 Preliminary Survey reports that spot forex now represents $2.0 trillion/day of the $5.3 trillion/day total market — an increase of 33% from the $1.5 trillion/day spot forex segment 3 years ago.
The BIS doesn’t break the spot forex segment into its component parts (institutional spot forex and retail spot forex); so, we have to make our own estimate of the size of our retail market. Back in early 2011, with the help of Michael King from the BIS, I did such an estimate based on the turnover figures in the 2010 Triennial Survey. Michael had suggested that available sources worldwide pointed to a retail spot forex market segment which was between 8% and 10% of the total spot forex market. Using a median figure of 9%, I calculated the size of the retail spot market at $135 billion/day in 2010.
If that 9% estimate is still valid, then the retail spot forex market accounts for approximately $180 billion/day of forex trading volume (turnover) in 2013. As a percentage of the overall $5.3 trillion/day foreign exchange market, our little retail spot forex segment is less than 3.4% of the total market. As a factor in the overall foreign exchange market, we hardly matter at all.
The turnover figures mentioned above are what the BIS calls [I]net-net turnover[/I] figures. Net-net turnover (or volume) figures are one of 3 measures of turnover used by the BIS; the others are called [I]gross turnover[/I] and [I]gross-net turnover.[/I] For an explanation of these 3 measures, see note #3 in this post — 301 Moved Permanently
Top Ten’s
• [B]The top 10 currencies[/B] by percentage share of worldwide turnover in 2013 (changes in ranking underlined)
USD, EUR, JPY, GBP, AUD, CHF, CAD, [U]MXN[/U], [U]CNY[/U], NZD
Compare to 2010: USD, EUR, JPY, GBP, AUD, CHF, CAD, HKD, SEK, NZD
• [B]The top 10 currency pairs[/B] by percentage share of worldwide turnover in 2013 (changes in ranking underlined)
EUR/USD, USD/JPY, GBP/USD, AUD/USD, [U]USD/CAD[/U], [U]USD/CHF[/U], [U]USD/MXN[/U], [U]USD/CNY[/U], [U]NZD/USD[/U], [U]USD/RUB[/U]
Compare to 2010: EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, USD/CAD, USD/SEK
(Note: #8, #9, and #10 were not reported in the 2010 Survey.)
• [B]The top 10 forex markets[/B] by total foreign exchange turnover in 2013 (changes in ranking underlined)
United Kingdom, United States, [U]Singapore[/U], [U]Japan[/U], [U]Hong Kong[/U], [U]Switzerland[/U], [U]France[/U], [U]Australia[/U], [U]Germany[/U], [U]Netherlands[/U]
Compare to 2010: UK, US, Japan, Singapore, Switzerland, Hong Kong, Australia, France, Denmark, Germany