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Results of 1998 Survey of the Turnover of Foreign Exchange and OTC Derivatives Markets in Hong Kong

The triennial survey of the foreign exchange and derivatives markets in Hong Kong showed that the average net daily turnover of foreign exchange and OTC derivatives transactions in Hong Kong amounted to US$82.4 bn in April 1998 (a decline of 12.8% from the US$94.4 bn in 1995 and equivalent to an annual compounded decline of 4.5%). The overall figure was made up of US$78.6 bn foreign exchange(a) transactions (US$90.2 bn in 1995) and US$3.8 bn OTC derivatives(b) transactions (US$4.2 bn in 1995).

"The decline in turnover reflects changing market circumstances, including particularly the impact of the Asian crisis and the depreciation of certain major currencies against the US dollar," said Mr. David Carse, Deputy Chief Executive of the Hong Kong Monetary Authority which conducted this survey. "Despite this, the latest figures show that Hong Kong remains a major centre for trading in foreign exchange and derivatives".

Hong Kong has participated in this international survey coordinated by the Bank for International Settlement (BIS) since 1989. Reflecting increasing attention on the foreign exchange and derivatives markets, there were 43 participants(c) in the 1998 survey, up from 26 in 1995. All authorised institutions and some major securities houses were invited to participate in the 1998 survey. The 366 reporting institutions comprised 177 licensed banks, 66 restricted licence banks, 111 deposit taking companies and 12 securities houses.

Release of survey results

Many participants will release their survey results simultaneously today. The BIS will publish the preliminary global results on 19 October 1998.

A detailed report covering the global results of both the turnover and amount outstanding sections will be released in the Spring of 1999.

New reporting changes

The key change in the survey content is the exclusion of Exchange Traded Instruments which are collected through a different channel and which will be reported on a global basis only. All futures transactions are thus excluded from the 1998 survey. Comparable figures have been adjusted accordingly to facilitate comparison.

Currency composition

Consistent with the 1995 survey, in terms of foreign exchange transactions, US dollar against Japanese Yen remained the most heavily traded currency pair in 1998 (25% of average net daily turnover). However, US dollar against Hong Kong dollar (22%) has replaced US dollar against Deutschemark (20%) as the second common currency pair.

In line with declining turnover in foreign exchange transactions, turnover of most currency pairs shrank in 1998. These included US dollar against Japanese yen and US dollar against Deutschemark. However, turnover in US dollar against Hong Kong dollar was 22% higher in 1998 than in 1995.

In relation to derivatives transactions, US dollar against Japanese yen was the most frequently traded (46% of total gross turnover) for foreign exchange derivatives. US dollar interest rate derivatives represented the largest share of the gross turnover of all interest rate derivatives in both the 1998 and 1995 surveys, up from 44% in 1995 to 46% in 1998. Hong Kong dollar interest rate derivatives, largely boosted by the increase in volatility of domestic interest rates, ranked second with their share rising from 13% in 1995 to 34% in 1998. Japanese Yen interest rate derivatives ranked third with their share declining from 42% in 1995 to 10% in 1998, attributable to the more flattened Japanese yield curve.

Type of transactions

Of the foreign exchange transactions, forward transactions (including both outright forwards and foreign exchange swaps) comprised a large proportion of net daily turnover at 61% (62% in 1995) while spot transactions contributed to 39% (38% in 1995) of the total.

Similar to the 1995 survey, activity was mainly concentrated on forward transactions of shorter maturities. Some 70% of the transactions matured within seven days.

Foreign exchange derivatives experienced a significant increase of 92% over 1995 with both currency swaps and currency options registering robust growth. Interest rate derivatives on the other hand declined by 31%, due largely to a significant fall in forward rate agreements. Interest rate swaps accounted for the largest share of interest rate derivatives (80%).

Counterparty analysis

As in the 1995 survey, a large proportion of the average net turnover of foreign exchange and derivatives transactions was carried out with overseas counterparties (72%). There was however an increase in the share of transactions with local counterparties from 25% in 1995 to 28% in 1998, reflecting more local participation. Of the transactions with local counterparties, 16% was with authorised institutions in Hong Kong, 2% with other local financial institutions and 10% with local non-financial customers. The share of transactions conducted through brokers was unchanged, at about 34%.

Market concentration

Local authorised institutions participating in the survey saw an increase in their share in gross turnover of foreign exchange and derivatives transactions to 22% (15% in 1995). The share of foreign authorised institutions accordingly fell from 84% to 73%. Securities houses made up the remaining 5% in 1998 (less than 1% in 1995).

Market concentration recorded no visible change between 1995 and 1998, with the top 10 players accounting for about 51% of gross turnover and the top 30 players, 78%.

Note to Editor

Three tables will be faxed, showing the turnover figures for the reporting institutions, broken down by currency and instruments for the foreign exchange transactions and by instruments for the derivatives transactions.

A more comprehensive analysis of the survey results as well as a comparison with other participants will be provided in the November issue of the Quarterly Bulletin of the Hong Kong Monetary Authority.

For further enquiries, please contact the Press and Publications Section, Hong Kong Monetary Authority, at telephone 2878 1480.


(a) Includes spot, outright forward and foreign exchange swaps transactions.

(b) Includes currency swaps and options, interest rate swaps and forward rate agreements only. Outright forward and foreign exchange swaps transactions were included as part of both the foreign exchange and derivatives transactions in the 1995 survey. They are now excluded from derivatives transactions in the 1998 survey as redefined by the BIS. The 1995 comparatives have been adjusted to facilitate proper comparison.

(c) These are Argentina, Australia, Austria, Bahrain, Belgium, Brazil, Canada, Chile, China, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Japan, South Korea, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Philippines, Poland, Portugal, Russia, Saudi Arabia, Singapore, Spain, South Africa, Sweden, Switzerland, Taiwan, Thailand, United Kingdom and United States.

Hong Kong Monetary Authority

29 September 1998

Last revision date: 1 August 2011
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