Summary results of a survey of activity in Canadian foreign exchange and derivatives markets conducted by the Bank of Canada in April 2004 are now available. Similar surveys were undertaken in 51 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 that are active in the wholesale foreign exchange and derivatives markets were surveyed. These consisted of 18 financial institutions, representing approximately 99 per cent of these markets in Canada. With respect to foreign exchange, the survey covered spot transactions, outright forwards, foreign exchange swaps, currency swaps, 2 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 2004 Survey
  • The turnover of traditional foreign exchange transactions (spot, outright forwards, and foreign exchange swaps) showed the highest growth rate since the 1995 survey. In April 2004, foreign exchange transactions totalled US$1,133 billion, compared with US$833 billion in April 2001, yielding an average daily turnover in 2004 of US$53.9 billion (over 21 business days), compared with an average of US$41.6 billion per day (over 20 business days) in 2001, an increase of close to 30 per cent.
  • Prior to the 2004 survey, the rate of growth in average daily turnover of traditional foreign exchange transactions had 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$5.4 billion per day from the relatively small base of US$2.6 billion in April 2001. With respect to single-currency interest rate derivatives, including forward rate agreements, interest rate swaps, and OTC options, average daily turnover in April 2004 totalled US$12.1 billion, compared with US$9.9 billion in April 2001, an increase of 22 per cent (see Table 2 for details on the individual products).
  • Table 3 shows the distribution by currency of foreign exchange market activity in Canada. Almost all transactions (95 per cent) have the U.S. dollar on one side. Transactions involving the Canadian dollar fell from 62 per cent in 2001 to 56 per cent in 2004. The other most significant currencies in foreign exchange transactions in Canada in 2004 were the euro (18 per cent), the Japanese yen (9 per cent), and the U.K. pound sterling (8 per cent). The Canadian dollar lost ground as a result of more non-Canadian dollar currency business against the U.S. dollar such as the euro (up 2 percentage points) and the "other" category (up 5 percentage points from the previous survey). In this "other" category, the most significant currencies were the Swiss franc, the Australian dollar, and the Mexican peso.
  • 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) was reversed in 2004. Spot transactions rose from 25 per cent in 2001 to 34 per cent in 2004, while foreign exchange swaps fell from 70 per cent to 59 per cent over the same period. Outright forwards were relatively more stable, increasing from 5 per cent in 2001 to 7 per cent in 2004.
  • Table 4 also provides data on the composition of foreign exchange business by counterparty. In April 2004, interbank trading accounted for 62 per cent of foreign exchange transactions in Canada and customer business for 38 per cent (compared with 64 per cent and 36 per cent, respectively, in April 2001).

Note: More detailed tables on the results of the Canadian survey will be made available on the Canadian Foreign Exchange Committee's (CFEC's) Web site (www.cfec.ca) later this year. Similarly, in the spring of 2005, the BIS will publish a more detailed report on the aggregated global data. The CFEC's Web site will contain a direct link to that report.

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
2004 1,132.5 53.9 29.6

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)



Foreign exchange derivatives Single-currency interest rate derivatives
Currency swaps OTC options Forward rate agreements Interest rate swaps OTC options
1995 - 0.8 3.0 1.0 0.3
1998 0.3 0.8 2.4 2.9 1.1
2001 0.3 2.3 2.9 6.1 0.9
2004 0.6 4.8 3.4 7.3 1.4

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



April 1983 March 1986 April 1989 April 1992 April 1995 April 1998 April 2001 April 2004
U.S. dollar 99 99 99 96 97 97 96 95
Canadian dollar 75 68 66 65 70 70 62 56
Euro - - - - - - 16 18
German mark 11 13 13 17 16 15 - -
Japanese yen 4 4 7 5 6 8 9 9
U.K. pound sterling 6 8 6 5 4 4 8 8
Other currencies 5 8 9 12 7 6 9 14
All currenciesa 200 200 200 200 200 200 200 200

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
2004 34 7 59 62 38