Seven Things You May Not Have Spotted in the Turnover Surveys

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: Hong Kong seems to be planting a flag in the ground for USD/RMB. It should probably not be a surprise given its position, but the growth of RMB trading (CNH and CNY) in Hong Kong has been fairly startling over the past year. RMB has reinforced a fairly recently-attained position as the largest pair in Hong Kong with $231 billion per day across all FX products, a 70.1% increase from the previous year. USD/HKD is next busiest at $134 billion per day, this too is up strongly year-on-year, by 45.9%.

For comparison, Singapore handles $109 billion per day in USD/RMB across all product sets, no year-on-year comparison is available as this is the first year the Singapore FX Committee has broken out RMB data, and the UK reports, which USD/CNY volume only, saw $97.1 billion per day in the latest report.

2: The numbers don’t really add up in the US spot report. It’s a well-known fact that a lot of business in the US is executed via a prime broker, with trading firms making up a large part of the spot market, but in the FXC report, the numbers are confusing. We noted in our main report on the FXC survey that PB is now involved in over 92% of all spot trading in the US. This amounts to $402.3 billion of the $436.1 billion executed daily.

The problem is, adding the numbers up, it means that PB is responsible for all spot volume except for that from Non-Financial Institutions. Some of these may be prime broked, not a lot, but even so, unless there is double counting involved in some shape or form, this means that the vast majority of Reporting Dealer flow goes through a PB. And we just cannot see, for example, Citi vs JP Morgan needing a prime broker. One for the data sleuths out there…

3: The US has switched it nomenclature. On the subject of the US and its report, there was a small, but telling, change to how it described one counterparty segment in the latest report. From the historical use of “Other Banks”, the FXC report now calculates for “Other Dealers”.

This seems a relatively trivial change, but one that better reflects the actual market, where a huge amount of volume in the US, especially in the afternoon, is executed by non-bank participants.

4: Singapore is catching Japan in yen trading. It was notable that Japan was the only centre to see activity drop on a year-on-year basis, but what was more startling perhaps is how quickly Singapore is closing the gap on Tokyo when it comes to yen trading. Across all products in yen, Singapore reports turnover of $204.5 billion per day, while Japan is in front with $240.1 billion.

The narrowing of the gap can be found in a comparison with the 2020 data, when Singapore handled just $115.2 billion and Japan handled $252.4. Japan has drifted slightly, but Singapore is booming – are we really getting close to a time when the largest centre for yen trading in Asia isn’t Tokyo?

5: We still need more detail on NDFs from Asia. This is a repeat of a previous complaint in these pages – and it will be repeated until we get some action! Asia is clearly growing exponentially as an FX centre, but beyond a few currency pairs, there is a real lack of detail in the Singapore and Hong Kong reports especially.

The region is big in NDFs so it would be nice to get an indication of how much is being traded and e-trading is also growing in Asia, so please can we get some execution data?

6: FX Swaps is big business everywhere…almost! The end of zero interest rates has brought good times for those that like to trade FX swaps – and the data shows it, with one exception. Taking the October 2020 survey as a base, FX swaps activity has grown by 12.3% across the seven centres, led by Singapore (+61.8%), Canada (+35.4%) and Hong Kong (+29.6%). Growth in the UK and Japan has been sterile and only the US, ironically given the attention on Fed policy from around the world, has dropped, by 4.2%.

Go back and compare to five years ago the number are even starker – up 28.4% across the centres, with every one showing a significant increase, led by Singapore at 103.5%, Canada at 98.1% and Hong Kong at 59.9%.

All that money being traded and still the e-ratio seems stubbornly stuck in neutral – clearly a good time to be a voice broker or on the swaps desk at a bank…

7: The UK has gone nuts on breaking out the currency pairs. The UK report has become a little “busy” as some would say in that it has probably trebled the currency pairs it breaks out data on. Want to know how much was done in EUR/MXN options in October 2023? The report will tell you ($222 million if you insist). EUR/KRW spot? Not a problem – it’s $17 million per day. Nirvana for any anorak that wants to slot in an FX question on a quiz, but it leaves me with two thoughts.

First, I hope this reporting is automated – you don’t want to be the person that has to break down GBP/PLN! Secondly, a little disappointing there’s no data on Chile-Nokkie or the Sol-Lari…