Summary results of a survey of activity in Canadian foreign exchange and derivatives markets conducted by the Bank of Canada in April 2001 are now available. Similar surveys were undertaken in over 45 other countries during the same month, and the central banks of many of those countries are also releasing their results today. This worldwide effort was coordinated by the Bank for International Settlements (BIS), which is issuing a press release today that summarizes highlights of the aggregated global turnover. 1 Surveys have been conducted by the Bank of Canada every three years since 1983, and the results of those surveys are shown in the tables included with this release.

All financial institutions in Canada active in the wholesale foreign exchange and derivatives markets were surveyed. These consisted of 28 financial institutions and 5 foreign exchange and fixed-income brokers. With respect to foreign exchange, the survey covered spot transactions, outright forwards, foreign exchange swaps, 2 currency swaps, and over-the-counter (OTC) options. The interest rate products covered were forward rate agreements, interest rate swaps, and OTC options. Participants were also asked to identify transactions by currency and type of counterparty.


Highlights of the 2001 Survey

  • The turnover of traditional foreign exchange transactions (spot, outright forwards, and foreign exchange swaps) showed only moderate growth in this survey. In April 2001, foreign exchange transactions totalled US$833 billion compared with US$773 billion in April 1998, yielding an average daily turnover in 2001 of US$41.6 billion (over 20 business days), compared with an average of US$36.8 billion per day (over 21 business days) in 1998, an increase of 13 per cent.
  • The rate of growth in average daily turnover of traditional foreign exchange transactions has declined steadily with each survey, from a high of 85 per cent in 1986 to 13 per cent in 2001 (Table 1).
  • The average turnover for currency swaps and OTC foreign exchange options more than doubled to US$2.6 billion per day from the relatively small base of US$1.1 billion in April 1998 (Table 2). With respect to single-currency interest rate derivatives, including forward rate agreements, interest rate swaps, and OTC options, average daily turnover in April 2001 totalled US$9.9 billion, compared with US$6.4 billion in April 1998, an increase of 55 per cent.
  • Table 3 provides the currency distribution of foreign exchange market activity in Canada. Almost all transactions (96 per cent) have the U.S. dollar on one side. Transactions involving the Canadian dollar fell from 70 per cent in 1998 to 62 per cent in 2001. The other most significant currencies in foreign exchange transactions were the euro, which replaced the German mark and 10 other European currencies (16 per cent), the Japanese yen (9 per cent), and the U.K. pound sterling (8 per cent).
  • Table 4 shows the composition of foreign exchange business by type of transaction. The trend for spot transactions to fall over time and for foreign exchange swaps to rise (with the exception of the 1995 survey) continued in 2001. Spot transactions fell from 28 per cent in 1998 to 25 per cent in 2001, while foreign exchange swaps rose from 68 per cent to 70 per cent over the same period. Outright forwards were relatively stable, increasing from 4 per cent in 1998 to 5 per cent in 2001.
  • Table 4 also provides data on the composition of foreign exchange business by counterparty. In April 2001, interbank trading accounted for 64 per cent of foreign exchange transactions in Canada and customer business for 36 per cent (compared with 72 per cent and 28 per cent, respectively, in April 1998).

Table 1: Traditional Foreign Exchange Transactionsa: Summary of Surveys
(Billions of U.S. dollars)

Total turnover Average daily turnover Per cent change
1983 103.2 5.2 -
1986 191.2 9.6 84.6
1989 299.9 15.0 56.3
1992 460.9 21.9 46.0
1995 566.5 29.8 36.1
1998 772.7 36.8 23.5
2001 832.9 41.6 13.0

a. Spot, outright forwards, and foreign exchange swaps.

Table 2: Derivatives Market Activity: Summary of Surveys
(Average daily turnover in billions of U.S. dollars)

Currency swaps and OTC foreign exchange options Forward rate agreements, interest rate swaps, and OTC interest rate options
1995 0.8 4.3
1998 1.1 6.4
2001 2.6 9.9

Table 3: Currency Distribution of Foreign Exchange Market Activity: Summary of Surveys
(Percentage share)

April 1983 March 1986 April 1989 April 1992 April 1995 April 1998 April 2001
U.S. dollar 99 99 99 96 97 97 96
Canadian dollar 75 68 66 65 70 70 62
Euro - - - - - - 16
German mark 11 13 13 17 16 15 -
Japanese yen 4 4 7 5 6 8 9
U.K. pound sterling 6 8 6 5 4 4 8
Other currencies 5 8 9 12 7 6 9
All currenciesa 200 200 200 200 200 200 200

a. Since every foreign exchange transaction involves two currencies, the reporting of all currencies necessarily sums to 200 per cent.

Table 4: Composition of Foreign Exchange Market Activity by Type of Transaction and Counterparty: Summary of Surveys
(Percentage share)

By type of transaction By counterparty
Spot Outright forwards Foreign exchange swaps Interbank Customer
1983 43 5 52 74 26
1986 43 5 52 69 31
1989 41 5 54 73 27
1992 33 4 63 76 24
1995 38 9 53 61 39
1998 28 4 68 72 28
2001 25 5 70 64 36


CONTACT:

Montréal:
Serge Boisvert
514 496-4796

Toronto:
Rob Ogrodnick
416 542-1339

Ottawa:
Judy DiMillo
613 782-8315

  1. The internet address for the BIS is www.bis.org. []
  2. Currency swaps involve the exchange of both streams of interest payments and principal amounts, whereas foreign exchange swaps involve the exchange of principal amounts only. []