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Results of the Bank for International Settlements Triennial Survey of Foreign Exchange and Derivatives Market Turnover

The Hong Kong Monetary Authority (HKMA) announced today (Wednesday) the Hong Kong results of the Bank for International Settlements (BIS) triennial survey on foreign exchange and derivatives market turnover1. The BIS is releasing the preliminary global results today.

Hong Kong, as in the last survey in 2007, ranked sixth in the global foreign exchange market2. If transactions in the over-the-counter (OTC) interest rate derivatives market are included, Hong Kong's ranking moved up from eighth in 2007 to seventh in 2010. In terms of dollar amount increases in foreign exchange trading activity, Hong Kong posted a US$56.6 billion increase and ranked fourth after the United Kingdom, the United States and Japan.

The Hong Kong results3 were broadly in line with global trends. A detailed analysis of the survey results together with country comparisons will be provided in the September issue of the HKMA Quarterly Bulletin. Set out below are the key findings for the Hong Kong market.

 

Net foreign exchange turnover

Average daily net turnover of foreign exchange transactions increased by 31.3% to US$237.6 billion as compared with the results of the previous survey conducted in 2007. Total turnover rose across major instruments, particularly in outright forwards and foreign exchange swaps. Average daily net turnover of outright forwards increased by 117.6% to US$32.0 billion, while that of foreign exchange swaps increased by 20.5% to US$147.0 billion. Hong Kong dollar against US dollar remained the most heavily traded currency pair although its share fell, mainly because of substantial increases in other currency pair transactions, to 29.4% from 40.5% in 2007. Sharp increases were observed in foreign exchange transactions involving US dollar against euro, yen, Australian dollar and other Asian currencies. A confluence of factors, including increased market demand for cross currency funding as well as carry trade activities involving these currencies, may have contributed to the changes.

 

Net OTC interest rate derivatives turnover

Average daily net turnover of OTC interest rate derivatives rose by 6.8% to US$18.5 billion. The growth was driven by forward rate agreements and interest rate option transactions, which increased by 85.8% and 128.7% respectively.

Turnover in Korean won denominated interest rate derivative contracts was the highest amongst all currencies, accounting for 25.6% of the total average daily net turnover. Market participants have attributed this to a number of reasons including the strong recovery of the Korean economy and an increase in market activity in anticipation of possible movements of the Korean won yield curve.

Compared to 2007, Hong Kong dollar denominated contracts fell by 68.4% in 2010. Market participants consider that the drop was largely a result of the low interest rate environment prevailing for the Hong Kong dollar since late 2008, hence less incentive for pursuance of active management of short term Hong Kong dollar interest rate exposures with interest rate derivatives.

Annex

For media enquiries, please contact:
Peggy Lo, Manager (Communications), at 2878 1687 or
Natalie Wu, Officer (Communications), at 2878 8246

Hong Kong Monetary Authority
1 September 2010

 

 1The turnover part of the survey comprised collection of data on gross turnover in notional amounts of foreign exchange spot, foreign exchange and interest rate over-the-counter (OTC) derivatives transactions in April 2010. Data were reported on a "locational" basis, i.e. based on the location of the sales desk of a deal.

 2Beginning with the 2010 survey, the BIS re-defines "foreign exchange market" as including all five foreign exchange instruments: spot transactions, outright forwards, foreign exchange swaps, currency swaps and currency options.

 3In Hong Kong, 67 market participants (50 in 2007) took part in the survey, comprising 63 authorized institutions and 4 major securities houses.

Last revision date: 1 August 2011
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