The BIS 2019 Triennial Central Bank Survey

Trading Discussion
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The Bank for International Settlements (BIS) in Basel, Switzerland, SERVES as banker to the world’s central banks.

Every three years, the BIS surveys the world’s central banks to measure trading acitivity in the foreign exchange markets. The data gathered in these surveys are published in September of the survey year in a document titled Triennial Central Bank Survey. These data represent the most comprehensive measure of foreign exchange trading volume available anywhere in that year. The most recent Triennial Surveys were released in 2004, 2007, 2010, 2013, and 2016.

The 2019 Survey has just been released.

Each Triennial Survey reports on

  1. turnover in the foreign exchange (FX) market during the month of April in the Survey year, and

  2. amounts outstanding in the OTC derivatives markets as of June 30 in the Survey year.

The data of interest to us, as retail forex traders, are the turnover data gathered in April.

Turnover is the term used by the BIS to describe transaction volume. This volume is measured and reported in several ways: turnover in specific currencies, turnover in specific currency pairs, turnover among specific counterparties, turnover by country, and turnover in the overall (world) FX market.

Here is a LINK to the 2019 Triennial Central Bank Survey in .pdf format.

And here are Highlights of the 2019 Survey (emphasis added)::

  • Trading in FX markets reached $6.6 trillion per day in April 2019, up from $5.1 trillion three years earlier. Growth of FX derivatives trading, especially in FX swaps, outpaced that of spot trading.

  • The US dollar retained its dominant currency status, being on one side of 88% of all trades. The share of trades with the euro on one side expanded somewhat, to 32%. By contrast, the share of trades involving the Japanese yen fell some 5 percentage points, although the yen remained the third most actively traded currency (on one side of 17% of all trades).

  • As in previous surveys, currencies of emerging market economies (EMEs) again gained market share, reaching 25% of overall global turnover. Turnover in the renminbi, however, grew only slightly faster than the aggregate market, and the renminbi did not climb further in the global rankings. It remained the eighth most traded currency, with a share of 4.3%, ranking just after the Swiss franc.

  • While the volume of spot trades increased relative to April 2016, the expansion was less strong compared with other instruments - hence the share of spot trades continued to fall, to 30% in 2019, compared with 33% in 2016. By contrast, FX swaps continued to gain in market share, accounting for 49% of total FX market turnover in April 2019. Trading of outright forwards also picked up, with a large part of the rise due to the segment of non-deliverable forwards (NDFs).

  • FX trading with “other financial institutions”, ie those other than reporting dealers, again exceeded inter-dealer trading volumes, reaching $3.6 trillion in April 2019, or 55% of global turnover. This was due to a higher share of trading with non-reporting banks as well as with hedge funds and proprietary trading firms (PTFs), while trading with institutional investors declined.

  • In April 2019, sales desks in five countries - the United Kingdom, the United States, Hong Kong SAR, Singapore and Japan - facilitated 79% of all foreign exchange trading. Trading activity in the United Kingdom and Hong Kong SAR grew by more than the global average. Mainland China also recorded a significant rise in trading activity, making it the eighth largest FX trading centre (up from 13th in April 2016).

Not mentioned in the Highlights, above:

  • London remains the largest FX market (as measured by trading volume), having a 40% market share.

For a further summary of data from the 2019 Survey, click this LINK.

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Any chance you think of Brexit affecting London’s position as largest FX market going forward?

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We’re still waiting to learn the effect of Brexit on London’s status as Top Dog in the financial world — because Brexit hasn’t happened yet. Since the June 2016 Brexit vote in the U.K., there have been 3+ years of agonizing over how (not to mention when) Britain should leave the E.U., all of which has held the London financial scene somewhat in limbo.

In 2017 and 2018, there was a lively debate here in the forum, in a thread titled

Is London's position as the world's largest forex market secure post-Brexit?.

At that time, opinions were divided on the question you have raised, and from what I am reading, opinions are still very much divided.

In broad terms, we can say that some London business has fled to Frankfurt and other venues in the E.U., and some bankers and brokers in London have lost their jobs (or been relocated) as a result.

But, as the BIS 2019 Triennial Survey reports, London retains a commanding share of the worldwide FX market — a share which is, in fact, increasing.

So, when Brexit has finally happened (next month, maybe), and the dust has settled on a new world order in the E.U. (some months, or years, from now), will London emerge as leader of the financial world? — Take your best guess. — Plunk down your 10 quid, and place your wager.

In the thread referenced above, there was discussion of the Z/Yen Global Financial Centres Index. The rankings determined in that Index are based on many factors, including job opportunities and quality-of-life issues, and therefore reflect more than FX market share. The latest Index, released in March 2019, showed a slight increase in the spread between New York (ranked #1) and London (ranked #2).

  • In September 2018, it was New York rated 788, and London rated 786.

  • In March 2019, it was New York rated 794, and London rated 787.

  • Both cities rose in the ratings. New York rose a little faster than London.

  • The September 2019 Global Financial Centres Index has not been released, but is due any day.

Regarding FX market share:

  • In the BIS 2016 Triennnial Survey, London held a 37.1% share of foreign exchange trading,
    and New York held a 19.4% share.
    Note that the 2016 Survey period (April 2016) was 2 months prior to the Brexit vote in the U.K.

  • In the BIS 2019 Triennial Survey, it was London 43.1%, and New York 16.5%.
    Note that there is no mention in the 2019 Survey of a Brexit effect on London’s FX market share.

  • London’s share increased over the 3-year period between Surveys, which also happens to coincide with the 3+ years of debate over how Britain should leave the E.U.

Here is a link to the March 2019 Z/Yen Global Financial Centres Index.

And here’s a graphic (from the March 2019 Index) showing the top 15 cities —

Z-Yen top 15 centers - March 2019
Z-Yen top 15 centers - March 2019790×709 86.9 KB

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Ummm, wow! What an answer, one which you could have simply answered “Who knows.” Muchas gracias!

London’s FX market share increase is perhaps a testament to where Londoners think they stand in the financial world, and how they think they’re change (from a market share perspective). I appears they’re staying put!

For all the talk about Frankfurt, I was surprised to see it in the 10th spot. Boston was also surprising.

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Update

On Wednesday, Z/Yen released The Global Financial Centres Index 26 for September 2019.

This latest Index shows the top 5 centers (New York, London, Hong Kong, Singapore, and Shanghai) holding their rankings (positions) relative to one another, but all 5 slipping in the ratings.

London showed the largest slide, down 14 points to 773 from its March 2019 rating of 787.

Brexit is analyzed in some detail on page 38, with respondents’ opinions on the short-term and long-term effects of Brexit displayed in two graphics. The Z/Yen summary of the Brexit situation reads as follows:

  • The two leading UK financial centres in the United Kingdom (London and Edinburgh), are the two centres that respondents believe will suffer the largest negative effects, although these effects are seen to improve a little in the longer-term.

  • Respondents consider that New York, Hong Kong, and Singapore will benefit substantially from Brexit. In Europe, Frankfurt is considered likely to benefit most, followed by Paris, Luxembourg, Zurich, and Dublin.

Also, there is this quote on page 9 from a London-based investment director:

  • “Brexit could have short-term negative but long-term positive impact on regulatory environment. Rule of law is already well-established in the UK and will remain so - corruption is minimal compared to some other centres.”

An interesting metric, in the context of this forum thread, is Table 3 on page 8 listing the centers (cities) which respondents believe will become more significant in the next 2 to 3 years.

London appears (in 11th place) on this list of 15 centers – New York did not make the list.

Here is a link to The Global Financial Centres Index 26 for September 2019

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Thanks for following up with them!

Qingdao, never heard of the place.

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It’s just northeast of Huiquanjiao.

I’m surprised you didn’t know that.

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Oh yes, Huiquanjiao, of course. How could I forget. Lol.

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Maybe someone knows where can I find the results of the 2019 Triennial Survey? I often participate in surveys and then I can’t find the results of the survey anywhere… For example, yesterday I filled out tellaldi.us a survey. I have written about the Aldi store, the products, and the staff working there. At the end of the survey, I even got the opportunity to participate in the drawing of a coupon for $100. I hope I win this coupon :smiley: In any case, even if I get nothing for taking part in this survey, I understand that I am helping my favorite supermarket improve customer service. Isn’t that great?

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