Five Things You May Not Have Spotted in the FX Turnover Reports

Once again, we’ve been trawling through the latest FX turnover reports from the UK, US, Singapore, Hong Kong, Japan, Australia and Canada, to find some micro-trends or observations you may not have spotted.

1: PB is on the rise again. For those banks that stood their ground in FX prime brokerage it seems like the good times are back – especially in the UK. It was April 2023 when the amount of spot FX business via a PB went through 90% of total spot volume in the US, over the past year it has risen again, to a new high of 93.5%. This, of course, is against a background of rising volumes generally – overall spot volume in the US was up 19.1% to $519.3 billion per day.

What is notable about the past year, however, is the rise in the UK report, for while spot volumes have risen 5.3% over the past year, the share via PBs has jumped from 41.8% to 46.9%. It should be noted that we have seen jumps like this in the past, but this could signify a couple of things.

The first is obvious, higher volatility is attracting hedge funds back to FX (performance has been good as well). The second may be less so, but do the higher PB figures indicate that non-bank market makers are increasing their influence? We have the well-established non-bank LPs that are pretty much part of the market’s furniture, but the last year has seen some newer names enter the fray – possibly with mixed results for the health of the overall ecosystem. Evidence in support of this can be found in the execution data of the New York FXC report – total volume with Banks/Other Dealers, more than doubled to $645 billion from $304 billion the year before.

2: Risk appetite is increasing on the buy side? The numbers from Other Financial Institutions (OFIs) in particular were very positive in the latest surveys from the UK and US, which is, after all, well in excess of 60% of the FX market. Again, looking at the spot numbers, while year-on-year volumes with Reporting Dealers and Other Bank drifted slightly in the UK, OFI volumes rose a cheeky little 32.3% (non-financials also rose, by 9.1%). Reporting Dealers remains the busiest segment in the UK, but the gap is narrowing – two years ago it was some $160 billion per day, in October 2024 it was $55 billion.

In the US, OFIs have long held sway, followed by Other Banks, and that remains the case, which may offer a clue that the growth is not all about the buy side and risk, because the US market has long been dominated by non-bank market makers. It could be that at least part of the growth is down to this segment.

On the non-financial side, US firms have increased hedging activity in both spot and outrights (but activity from this segment fell by three-quarters year-on-year in FX options), while in the UK, the numbers were pretty steady, overall slightly higher.

Overall? The data suggests that volatility is both attracting speculative money and grabbing the attention of those with currency exposures that previously they may not have hedged.

3: Singapore is starting to dominate Asia-Pacific. This is not necessarily a new story, but Singapore’s domination of the Asia-Pacific time zone continues to grow. In the October 2019 surveys, it wasn’t even the biggest APAC centre – Hong Kong had that title – but in October 2024 Singapore’s total FX turnover almost matched the other three APAC centres combined.

From $548 billion per day in October 2019, five years later Singapore is at $1.05 trillion. In spot it has risen more than three-times from just under $85 billion per day to over $276 billion, and in FX swaps it has pretty much doubled from $263.2 billion to $524 billion.

We will include the semi-annual complaint about the lack of detail in the Singapore survey, which precludes deeper analysis, but one has to think that in the next 12 months, it will be handling half of all APAC daily FX volume.

For context, over the same period Hong Kong has grown – inevitably given the continued rise of China – from $568 billion to $669 billion, as has Australia, from $139 billion to $182 billion per day.

Which leads to our next observation…

4: What has happened in Japan? Overall turnover in Japan is at its lowest since April 2019 (it is down $9 billion per day from October 2019), largely thanks to spot turnover dropping sharply, to levels last seen in 2012 at just over $100 billion per day. Given the volatility in Japan over the past couple of years this is a little surprising, although it could be that every carry trader – having been blown up in August – was either wary of re-entering the market, or they had their positions on, were earning their carry as usual, and didn’t need to trade?

FX swaps volumes in Japan rose over the five years to October 2024, as did FX options volumes, but alongside spot, outrights also declined pretty sharply, meaning the speculators were out of the market – something that is probably good news to the Japanese authorities! 

5: Average trade sizes bounced back, but what happened in the US? This may be an outlier or straight error, but average trade size in the US for spot tickets jumped dramatically. Across the UK, average spot trade size recovered strongly from what was a new low in the April 2024 report at $826,000, to hit $979,000 – the highest it has been since April 2021.

In the US, however, following over a decade of sub-$1 million trade sizes, according to the FXC report, the average trade size was $1.856 million! This obviously flies in the face of suggestions earlier than non-banks are having a greater say, but has all the hallmarks of an outlier – unless the hedgers were out in force ahead of the US election?