Making up the numbers in Forex

The figure of $1.9 trillion US dollars is often cited as the daily trading volume of the Forex market. What is often not presented is where this actual figure comes from. This figure originates from The Bank for international Settlement (BIS) Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity. I know it is a bit of a mouthful. This just means that every three years BIS will carry out a global central bank survey of the Forex and derivatives market. The basic role of the survey is to gauge the size and depth of this Over The Counter market.

The figure of $1.9 trillion US dollars originated from the 2004 survey. Below is an excerpt taken from page five of the report:

The full text can be downloaded from BIS.

As you can from table B.1 the figures are the average daily turnover for the month of April of 2004. The figure is made up of the 52 central banks that were participants. It is clear that turnover has clearly increased since 1989. The report asserts that this strong growth can be attributed to momentum trading and the carry trade.

The highest proportion of the total turnover for 2004 was derived from Forex swaps followed by spot transactions. It will be very interesting to see the 2007 report and see if the Forex swaps still make up the highest proportion. The preliminary report is due for release in September this year. I will post the highlights of the report.

I am sure a lot of seasoned traders already knew this information however if you are just starting out you probably wouldn’t know of this. The BIS websites has a lot of interesting articles and reports. It is well worth investing some time to have a read. A link to BIS can be found in my Blogroll.

About the author

Mark - Is a 28 year old form Australia. He has a Bachelor in Economics and a Major in CS. He is currently working towards his CFP. His interests include algorithmic trading systems, artificial intelligence, game theory and poker.