Turnover - April 1998

In April 1998, the Ufficio Italiano dei Cambi and the Banca d'Italia conducted a survey on foreign exchange and derivatives market turnover with the major resident banks, similar to that conducted in 1995, and to those conducted in 1989 and 1992 on the foreign exchange turnover only.

This survey is part of a global survey involving central banks of 43 countries, co-ordinated by the Bank for International Settlements, which will release, in mid-October, the aggregated global results, after adjusting for cross-border double-counting.

The Italian survey was conducted on a sample of 33 banks (21 Italian banks and 12 foreign banks resident in Italy). It is estimated that their share of the foreign exchange market is equivalent to 75 per cent; the sample of the previous survey, which included banks and securities dealers, represented 77 per cent. Data are computed on a daily basis and are adjusted for local dealers double-counting.

In order to make a correct comparison with the 1995 survey results, it should be enphasized that the 1998 turnover part has collected data on foreign exchange and over-the-counter (OTC) derivatives markets contracts, excluding transactions carried out on exchange-traded markets. The collection of data on notional amounts and market values of derivatives contracts outstanding in the different segments of the derivatives market has been combined with a new initiative, aimed at the regular reporting of data on OTC derivatives markets (Yoshikuni scheme), whose results will be released in the future.

Adding to foreign exchange transactions those in derivatives products, the gross volume reached 1.020 billion dollars, equivalent to 919 billion after adjusting for local double-counting (600 in 1995). The average daily turnover amounted to 44 billion (33 in 1995).

The majority of transactions was concentrated on foreign exchange market (86% of global turnover). The activity in foreign exchange and interest rate derivative products covered the remaining 14 per cent. On the foreign exchange market there was a sensible decline in the share of spot transactions, from 52 % to 35%, and a proportionate increase in forward transactions, from 38 % to 51%. Within the derivatives markets, the volume of foreign exchange derivatives felt significantly in both absolute and percentage terms. On the contrary, the volume of interest rate derivatives increased remarkably in both absolute and percentage terms. The volume of interest rate derivatives moved from 35 billion dollars to 114 billion dollars and the share on derivatives markets turnover increased from 62% to 88 per cent.

The most important types of instruments remained the traditional foreign exchange instruments (spot, outright forward and swap) which accounted for some 86% of global activity in foreign exchange and derivative products. The volume of foreign exchange swaps remained dominant on both the forward exchange market (89%) and the interest rate market (72%). The combined volume of currency options and interest rate options doubled, compared with 1995, but the contribution to the global turnover was unchanged (2%).

As in the spot market, trade in the derivatives market was characterized by a high proportion of inter-bank transactions (respectively 87% and 92%). About three quarters of the net global turnover was carried out with foreign counterparties, almost exclusively banks. In contrast with international transactions, the domestic operations were concentrated with non-financial customers.

In the foreign exchange and derivatives markets, the dominance of transactions involving Italian lira, representing aproximately 80% of total turnover, was confirmed. With regard to foreign currencies, the role of the dollar continued to be prevailing both in the spot and in the forward markets. The currency pair lira/dollar represented some 74% of total transactions against lira (89% excluding spot market) while the currency pair lira/mark contributed only 16% (5% excluding spot market) to the related turnover. With respect to the remaining 20%, trading involving the dollar remained dominant compared to all other foreign currencies. The currency pair dollar/mark (35%) was the most traded. The increase of the pairs mark/pound (10%) and dollar/pound (8%) and the decrease of the pair dollar/ecu, from 22% to 2% of the total, are of interest. On the interest rate market, the contracts referred to dollar were two times larger than those referred to mark.