OTC FX contract value doubles in 2007/10 -BIS

By Naomi Tajitsu

LONDON, Nov 30 (BestGrowthStock) – Market volatility after the
Lehman collapse in 2008 and in the first half of 2010 prompted
the value of over-the-counter currency contracts to double in
2007-2010 from the previous three years, the Bank for
International Settlements said on Tuesday.

Trading activity with other financial institutions,
including non-reporting banks, hedge funds and pension funds,
also drove a rise in global foreign exchange positions, with
their share surpassing transactions with reporting dealers for
the first time in 2010.

The dollar remained the most popular currency for forwards,
swaps and options, but its proportion of overall market value
fell, while that of the euro and sterling increased.

The latest BIS figures showed gross market value of overall
foreign exchange contracts stood at $3.158 trillion at the end
of June 2010, up 96 percent from $1.612 trillion in June 2007.

The value of currency swaps and combined outright forwards
and FX swaps roughly doubled, while options also rose due to a
surge in currency market volatility since late 2008.

At the same time, the number of positions in foreign
exchange instruments increased moderately during the same
period, with the number of contracts coming in at 62,933,
compared with 57,604 in the three years to June 2007.

The dollar was involved on one side of 86 percent of
notional contracts, up from 83 percent in 2004-07 and supporting
the view that the U.S. currency remains the most liquid
currency.

However, its proportion of gross market value slipped to 81
percent from 91 percent from three years ago, while that for
euros increased to 44 percent from 35 percent, and sterling to
21 percent from 13 percent.

The currency breakdown figures were adjusted for
inter-dealer double counting, adding up to 200 percent, rather
than 100 percent.

Currency swaps accounted for 43 percent of the total share
by value, while forwards and swaps held at 42 percent. Options
accounted for 14 percent.

Demand for instruments with maturities of less than one year
by far remained the highest among investors, but their share
slipped from three years ago, while maturities between one and
five years and more than five years increased.

The figures released on Tuesday supplemented daily turnover
figures included in the BIS’s triennial currency survey released
in September.
(Additional reporting by Tamawa Desai; Editing by xxx)

OTC FX contract value doubles in 2007/10 -BIS