Survey of Foreign Exchange and Derivatives Market Activity in Canada
Summary results of a survey of Canadian foreign exchange and derivatives markets are now available. The survey was conducted by the Bank of Canada in April 1998 and covered activity in the foreign exchange and derivatives markets. Similar surveys were undertaken by about 40 other countries during the same month, and the central banks of many of those countries are also releasing their results today. Previous surveys were conducted by the Bank of Canada in April 1983, March 1986, April 1989, April 1992, and April 1995.
All financial institutions in Canada active in the wholesale foreign exchange and derivatives markets were surveyed. This included 38 financial institutions and 10 foreign exchange and fixed-income brokers. With respect to foreign exchange, the survey covered spot, outright forwards, foreign exchange swaps, currency swaps, and over-the-counter (OTC) options. The interest rate products covered included forward rate agreements, interest rate swaps, and OTC options. Participants were also asked to identify transactions by currency and type of counterparty. A detailed analysis of the survey will appear in the Winter 1998-1999 issue of the Bank of Canada Review.
Highlights of the 1998 survey
- The volume of traditional foreign exchange transactions (spot, outright forwards, and swaps) has continued to grow substantially. In April 1998, foreign exchange transactions totalled US$773 billion compared with US$566 billion in April 1995, yielding an average daily turnover in 1998 of US$37 billion (over 21 business days), compared with an average of US$30 billion per day (over 19 business days) in 1995, an increase of 23 per cent.
- Although the growth in volume was substantial, the rate of increase has declined steadily with each survey. Compared with the 23-per-cent increase in 1998, the increase, over the preceding survey, in average daily volume in 1995, 1992, and 1989 was 36 per cent, 47 per cent, and 50 per cent, respectively.
- The average turnover for currency swaps and OTC foreign exchange options amounted to US$1.1 billion per day, an increase of 36 per cent over the April 1995 survey. In regard to single-currency interest rate derivatives, including forward rate agreements, interest rate swaps, and OTC options, average daily turnover during the month of April totalled US$6.4 billion, compared with US$4.3 billion in April 1995, an increase of 48 per cent.
- Ninety-seven per cent of the foreign exchange business in Canada (US$749 billion) involved transactions against U.S. dollars, the same percentage as in 1995. The Canadian dollar was involved in 71 per cent of the total U.S. dollar transactions, followed by German marks (13 per cent), Japanese yen (7 per cent), U.K. pounds (4 per cent), and other currencies (5 per cent), a very similar breakdown to the previous survey.
- The composition of foreign exchange business has changed since the 1995 survey. Swap, spot, and outright forward transactions accounted for 68 per cent, 28 per cent, and 4 per cent, respectively, of U.S. dollar transactions. The proportion of swap transactions was larger than in April 1995 (when it was 53 per cent), while the share of both spot and outright forward transactions decreased (from 38 per cent and 9 per cent, respectively, in the April 1995 survey).
- Interbank trading accounted for 72 per cent of U.S. dollar transactions in Canada and customer business for 28 per cent (compared with 61 per cent and 39 per cent, respectively, in April 1995). The proportion of interbank versus customer volume is back up to the more typical level that was found in the 1992 and 1989 surveys (76/24 per cent and 73/27 per cent, respectively).
Note: The data collected by Canada and other countries will be adjusted for cross-border double-counting and aggregated by the Bank for International Settlements (BIS). It is expected that the BIS will issue a press release with summary highlights of the global turnover results in October 1998. A detailed report will be published in the late spring/early summer of 1999.
Survey of foreign exchange market activity in Canada—April 1998