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Sizing up global foreign exchange markets

Author

Listed:
  • Andreas Schrimpf
  • Vladyslav Sushko

Abstract

The latest BIS Triennial Survey shows that global foreign exchange trading increased to more than $6 trillion per day. Trading bounced back strongly following a dip in 2016, buoyed by increased trading with financial clients such as lower-tier banks, hedge funds and principal trading firms. Prime brokerage volumes recovered in tandem. These developments were driven in large part by the greater use of FX swaps for managing funding and greater electronification of customer trading. They led to further concentration of trading in a few financial hubs.

Suggested Citation

  • Andreas Schrimpf & Vladyslav Sushko, 2019. "Sizing up global foreign exchange markets," BIS Quarterly Review, Bank for International Settlements, December.
    • Handle: RePEc:bis:bisqtr:1912f
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    References listed on IDEAS

    as
    1. Dagfinn Rime & Andreas Schrimpf & Olav Syrstad, 2017. "Segmented money markets and covered interest parity arbitrage," BIS Working Papers 651, Bank for International Settlements.
    2. Yin‐Wong Cheung & Robert N McCauley & Chang Shu, 2019. "Geographic Spread of Currency Trading: The Renminbi and Other Emerging Market Currencies," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 27(5), pages 25-36, September.
    3. Andreas Schrimpf & Vladyslav Sushko, 2019. "FX trade execution: complex and highly fragmented," BIS Quarterly Review, Bank for International Settlements, December.
    4. Yin-Wong Cheung & Robert N McCauley & Chang Shu, 2019. "Geographic spread of currency trading: The renminbi and other EM currencies," GRU Working Paper Series GRU_2019_011, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    5. Robert McCauley & Michela Scatigna, 2011. "Foreign exchange trading in emerging currencies: more financial, more offshore," BIS Quarterly Review, Bank for International Settlements, March.
    6. Morten Bech, 2012. "FX volume during the financial crisis and now," BIS Quarterly Review, Bank for International Settlements, March.
    7. Eichengreen, Barry & Mehl, Arnaud & Lafarguette, Romain, 2016. "Cables, Sharks and Servers: Technology and the Geography of the Foreign Exchange Market," CEPR Discussion Papers 11053, C.E.P.R. Discussion Papers.
    8. Claudio Borio & Robert Neil McCauley & Patrick McGuire & Vladyslav Sushko, 2016. "Covered interest parity lost: understanding the cross-currency basis," BIS Quarterly Review, Bank for International Settlements, September.
    9. Claudio Borio & Robert Neil McCauley & Patrick McGuire, 2017. "FX swaps and forwards: missing global debt?," BIS Quarterly Review, Bank for International Settlements, September.
    10. Chiţu, Livia & Eichengreen, Barry & Mehl, Arnaud, 2014. "When did the dollar overtake sterling as the leading international currency? Evidence from the bond markets," Journal of Development Economics, Elsevier, vol. 111(C), pages 225-245.
    11. Nikhil Patel & Dora Xia, 2019. "Offshore markets drive trading of emerging market currencies," BIS Quarterly Review, Bank for International Settlements, December.
    12. Joel Hasbrouck & Richard M. Levich, 2017. "FX Market Metrics: New Findings Based on CLS Bank Settlement Data," NBER Working Papers 23206, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Cheung, Yin-Wong & Grimm, Louisa & Westermann, Frank, 2021. "The evolution of offshore renminbi trading: 2016 to 2019," Journal of International Money and Finance, Elsevier, vol. 113(C).
    2. Andreas Schrimpf & Vladyslav Sushko, 2019. "FX trade execution: complex and highly fragmented," BIS Quarterly Review, Bank for International Settlements, December.
    3. Gergely Hudecz & Edmund Moshammer & Alexander Raabe & Gong Cheng, 2021. "The euro in the world," Discussion Papers 16, European Stability Mechanism, revised 27 Oct 2021.
    4. Alexander Barzykin & Philippe Bergault & Olivier Guéant, 2023. "Algorithmic market making in dealer markets with hedging and market impact," Mathematical Finance, Wiley Blackwell, vol. 33(1), pages 41-79, January.
    5. Mathias Drehmann & Vladyslav Sushko, 2022. "The global foreign exchange market in a higher-volatility environment," BIS Quarterly Review, Bank for International Settlements, December.
    6. Fernando Eguren-Martin & Andrej Sokol, 2022. "Attention to the Tail(s): Global Financial Conditions and Exchange Rate Risks," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(3), pages 487-519, September.
    7. Anna Boldizsár & Zalán Kocsis & Zsuzsa Nagy-Kékesi & Gábor Sztanó, 2020. "FX Forward Market in Hungary: General Characteristics and Impact of the COVID Crisis," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 19(3), pages 5-51.
    8. Alexis Derviz, 2023. "Foreign Exchange Implications of CBDCs and Their Integration via Bridge Coins," Working Papers 2023/7, Czech National Bank.
    9. Julian Caballero & Alexis Maurin & Philip Wooldridge & Dora Xia, 2022. "The internationalisation of EME currency trading," BIS Quarterly Review, Bank for International Settlements, December.
    10. Sirio Aramonte & Wenqian Huang, 2019. "OTC derivatives: euro exposures rise and central clearing advances," BIS Quarterly Review, Bank for International Settlements, December.
    11. Kitamura, Yoshihiro, 2024. "The price discovery in the renminbi/USD market: Two spot, two swap, and three forward FX rates," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    12. Batten, Jonathan A. & Lončarski, Igor & Szilagyi, Peter G., 2021. "Strategic insider trading in foreign exchange markets," Journal of Corporate Finance, Elsevier, vol. 69(C).
    13. Philippe Bergault & Louis Bertucci & David Bouba & Olivier Gu'eant, 2022. "Automated Market Makers: Mean-Variance Analysis of LPs Payoffs and Design of Pricing Functions," Papers 2212.00336, arXiv.org, revised Nov 2023.
    14. Frank Westermann, 2023. "On the Geographical Dispersion of Euro Currency Trading: An Analysis of the First 20 Years and a Comparison to the RMB," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(2), pages 263-287, June.
    15. Yannis Dafermos & Daniela Gabor & Jo Michell, 2023. "FX swaps, shadow banks and the global dollar footprint," Environment and Planning A, , vol. 55(4), pages 949-968, June.
    16. Tahara, Hiroki, 2020. "On the Applicability of the Black-Scholes Model to the Inverse Quantity of Price (Under Peer-Review)," OSF Preprints fgnca, Center for Open Science.
    17. Zhang, Zhongxia & Svirydzenka, Katsiaryna, 2020. "Unintended Consequences of Foreign Exchange Reserve Movements? Financial Dollarization in Emerging Market Economies," MPRA Paper 120822, University Library of Munich, Germany.
    18. Hasbrouck, Joel & Levich, Richard M., 2021. "Network structure and pricing in the FX market," Journal of Financial Economics, Elsevier, vol. 141(2), pages 705-729.
    19. Alexander Barzykin & Philippe Bergault & Olivier Gu'eant, 2021. "Market making by an FX dealer: tiers, pricing ladders and hedging rates for optimal risk control," Papers 2112.02269, arXiv.org, revised Jun 2023.

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    More about this item

    JEL classification:

    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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