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Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in Canada during April 2019

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In April, the Bank of Canada and 52 other central banks and monetary authorities conducted the latest triennial survey of turnover activity in the foreign exchange (FX) and over-the-counter (OTC) derivatives markets in their respective countries. This worldwide effort was coordinated by the Bank for International Settlements (BIS) to obtain global, comprehensive and consistent information on the size and structure of the FX and OTC derivatives markets.

The Bank of Canada today released the summary results of its survey, as did many other participating central banks.1 As well, the BIS summarized highlights of the aggregated global turnover.2 All dealers in Canada that are active in the wholesale FX and OTC derivatives markets were surveyed.3

With respect to FX, the survey covered spot transactions, outright forwards, FX swaps, currency swaps and OTC FX options.4 The interest rate products covered were forward-rate agreements, interest rate swaps, overnight index swaps and OTC interest rate options.

Highlights from the 2019 survey

  • Total turnover of FX transactions rose from US$1.8 trillion in April 2016 to almost US$2.3 trillion in April 2019, an increase of 27.6 percent. Average daily turnover increased from US$85.5 billion in 2016 to US$109.1 billion in 2019 (Table 1).
  • The increase was driven by FX swaps with all other product categories except for options experiencing turnover growth. The growth in FX turnover over the past three years is consistent with the trend in other major jurisdictions and is in line with changes in market activity that can be seen through the semi-annual Canadian Foreign Exchange Committee (CFEC) FX survey, with Canada’s share of global turnover being unchanged at 1.3 percent.
  • Single-currency interest rate derivatives turnover in April 2019 totalled almost US$2.6 trillion, up by 274 percent from the US$688.6 billion recorded in 2016 (Table 2). The increase was driven by forward rate agreements and interest rate swaps. There was also increased trading in overnight indexed swaps, which are now reported separately. The large increase is similar to the trend in other major jurisdictions, with Canada’s share of global turnover rising slightly from 1.1 percent in 2016 to 1.6 percent in 2019. Some of this increase is a result of structural changes to the Canadian derivatives operations of some of the reporting financial institutions.
  • The composition of FX business by type of instrument or product and by type of counterparty is shown in Table 3. The proportion of FX and currency swaps rose while the proportion of all other product categories declined. The proportion of business going through reporting dealers and financial customer increased slightly while the share of non-financial customers declined.5
  • Table 4 shows the breakdown by currency of foreign exchange market activity in Canada. There has been little change from 2016, with the US dollar, the Canadian dollar and the euro being the top three traded currencies.
  • Tables 5 and 6 provide more detailed information on the turnover in foreign exchange products in Canada. Total FX turnover in the Canadian-dollar against the U.S.-dollar as well as other currency business against the US dollar increased while transactions in the Canadian dollar against currencies other than the US dollar, and all other currency pairs, declined.
  • Table 7 provides a maturity breakdown for outright forwards and FX swaps. The trend is the same as in 2016:
    • almost 98 percent of these transactions being less than six months in duration
    • 61 percent being for one week or less.
  • The survey includes an execution methods table for foreign exchange contracts (Table 8). There has been little change relative to 2016, with the share of FX transactions undertaken by way of voice direct6 (over the telephone) being unchanged. However, the share of single bank proprietary trading systems increased, and the share of other electronic venues declined.

  1. 1. The reporting basis of the BIS survey is based on the location of the sales desk in Canada. The changes in the turnover activity could also represent changes in the organizational structure of the reporting banks; for example, moving the sales desk from one jurisdiction to another relative to the last reporting period in 2016.[]
  2. 2. The BIS will publish the global results of the survey.[]
  3. 3. Globally, almost 1,300 reporting dealers, mainly large commercial and investment banks, participated in the April 2019 triennial turnover survey. In Canada, 15 dealers participated.[]
  4. 4. Currency swaps involve the exchange of streams of interest payments and principal amounts, whereas foreign exchange swaps involve the exchange of principal amounts only.[]
  5. 5. Financial customers comprise financial institutions such as mutual funds, pension funds, hedge funds, currency funds, money market funds, leasing companies, insurance companies, financial subsidiaries of corporate firms, and central banks. Financial customers also include smaller commercial and investment banks that do not participate as reporting dealers in the triennial survey.[]
  6. 6. Most internal or related party trades are classified as having been executed by “voice direct” in the survey.[]