Turnover - April 2013

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In April 2013 the Bank of Italy conducted the customary triennial survey of the volume of foreign exchange and OTC derivatives market transactions carried out by the major resident banks. The survey was performed simultaneously by 53 central banks and monetary authorities, coordinated by the Bank for International Settlements, which will release the preliminary global findings after adjusting for cross-border double-counting.

The Italian survey was conducted on a sample of 36 banks (32 Italian banks and 4 branches of foreign banks). Their share of the foreign exchange and derivatives markets is estimated at about 96 per cent in both cases, whereas the sample of the 2010 survey accounted for 88 and 94 per cent respectively. The data are computed on a daily basis and are adjusted to eliminate double-counting of transactions between local dealers (but not cross-border double-counting, which is done by the BIS).

In April 2013 the total gross volume of foreign exchange and derivatives transactions carried out by the whole banking system amounted to $529 billion, or $494 billion after adjusting for double-counting; in 2010 the figures were $708 billion and $682 billion respectively. The average daily turnover (20 trading days in April 2013) is estimated at $25 billion ($32 billion in 2010). For the total of foreign exchange market plus interest rate derivatives products, the gross volume in the month amounted to $1,089 billion, or $994 billion after adjusting for double-counting (against $1,460 billion and $1,304 billion in 2010). Average daily turnover was almost $50 billion, compared with $62 billion in 2010.

According to the data provided by the sample, the contribution of the foreign exchange market to total activity decreased sharply compared with 2010, falling from 50.1 to 47.6 per cent. The largest contraction was in the spot segment, whose turnover fell by about 30 per cent, from $190 billion to $134 billion, while in the forward segment, which incorporates outright forwards and FX swaps, turnover fell from $399 billion to $320 billion. The contribution of foreign exchange derivatives (currency swaps and options) to total activity doubled to 2.1 per cent and the volume of transactions amounted to $20 billion (against $12 billion in 2010). The contraction in the interest rate derivatives market was more modest, the volume falling from about $573 billion to $480 billion and the share of total turnover increasing from 48.8 to 50.3 per cent.

Swaps remained the most widespread type of instrument, accounting for the largest share of volume in both the foreign exchange market (64 per cent, against 62 per cent in 2010) and the interest rate market (58 per cent compared with 62 per cent in 2010). While in the foreign exchange market the volume of outright forwards fell to 3 per cent (from 4 per cent in 2010), in the interest rate derivatives market the share of forward rate agreements rose to 39 per cent (from 31 per cent in 2010). The performance of options was negative overall. The volume of interest rate options fell to a third of the 2010 value, while foreign exchange options increased by more than a third; in 2013 the volumes of both types of option are virtually equal, as are the shares of turnover in the respective markets (3 per cent).

Activity in both the foreign exchange market and the interest rate derivatives market again included a high proportion of transactions with non-resident banks (73 per cent, against 71 per cent in 2010). The share of transactions with resident banks increased in the foreign exchange market (from 4 to 7 per cent), but diminished in the interest rate market (from 21 to 12 per cent). Transactions with other financial institutions not taking part in the survey fell from 10 to 5 per cent of total turnover in the foreign exchange segment and from 19 to 7 per cent in the interest rate segment; the contribution of resident customers to foreign exchange turnover increased four times (from 5 to 21 per cent), while their contribution to interest rate turnover was negligible.

The euro was the dominant currency in both the foreign exchange and the derivatives markets, accounting for 91 per cent of total turnover, against 86 per cent in 2010. In both the spot and the forward segments of the foreign exchange market contracts in euros significantly outperformed those in dollars, amounting to 84 and 69 per cent respectively in 2013, against 75 and 84 per cent in 2010. The currency pair euro/dollar accounted for about 67 per cent of total transactions against euro (76 per cent excluding the spot market). In other currency pairs, accounting for 16 per cent of total transactions, the US dollar continued to dominate; USD/GBP was the most traded pair. The interest rate market was also dominated by the euro, which accounted for more than 98 per cent of all contracts, while those referring to the dollar amounted to just over 1 per cent, as in 2010. The contribution of other currencies was negligible.