London Increases Share Of Foreign Exchange Trading To Over A Third Of Global Total

The UK extended its leading share of global foreign exchange trading to 34% in April 2007 from 31% in April 2004 according to the new edition of IFSL’s Foreign Exchange report. This growth stemmed from trading generated by prime brokerage, investment banking and hedge funds, all areas that are increasingly important to London’s position as a global financial centre. Other large centres saw a decline in their shares during this period, the US from 19.2% to 16.6%, Japan from 8.3% to 6.0% and Germany from 4.9% to 2.5%.

The bulk of trading in the UK was conducted in London which is by far the largest global centre for foreign exchange business. For example, twice as many dollars are traded on the foreign exchange market in the UK than in the US, and more than twice as many euros are traded in the UK than in all the euro-area countries combined. Foreign owned institutions accounted for around 70% of foreign exchange trading in London in April 2007.

In the three years up to April 2007, global average daily turnover in foreign exchange transactions increased by 70% to a record $3.2 trillion. Key factors in the increase of foreign exchange trading were its growing importance as an asset class, an increase in fund management assets and a proliferation of electronic trading platforms.

Background

Overall daily turnover on the foreign exchange market, including $363bn traded in non-traditional foreign exchange derivatives and products traded on exchanges, averaged nearly $3.6 trillion in April 2007.