31 Dec 2016
The foreign exchange and derivatives markets in Hong Kong
The results of the 2016 triennial global survey of turnover in foreign exchange (FX) and over-the-counter (OTC) interest rate derivatives markets were published in September. The results show that Hong Kong’s ranking in FX market turnover moved up to fourth from fifth in the previous survey conducted in April 2013, and up to fourth from sixth when OTC interest rate derivatives were also included. The average daily turnover of FX transactions in Hong Kong increased by 59% to US$436.6 billion, and that of OTC interest rate derivatives increased by nearly three times to US$109.8 billion.
In April 2016, the HKMA conducted a regular triennial survey of turnover in the Hong Kong FX and OTC interest rate derivatives markets as part of a global survey co-ordinated by the Bank for International Settlements (BIS). Fifty-two central banks and monetary authorities (including the HKMA) participated in the global survey, which aimed to collect comprehensive and internationally consistent information on the size and structure of global FX and OTC interest rate derivatives markets. The survey collected turnover data in FX (spot, outright forwards, FX swaps, currency swaps and currency options) and OTC interest rate derivatives (forward rate agreements, interest rate swaps and interest rate options) markets. This article presents the main results of the Hong Kong survey, which covers 59 institutions (referred to as “reporting dealers” in the survey) operating in Hong Kong, comprising 55 authorized institutions (AIs) and four licensed corporations. The article also compares the Hong Kong results with the global results.
The results of the 2016 global survey published by the BIS indicate a slight decline in FX turnover and a moderate increase in OTC interest rate derivatives turnover from April 2013 to April 2016 (Table 1). The average daily FX turnover declined by about 5% to US$5.1 trillion in April 2016 from US$5.4 trillion in the previous survey. The decline was mainly driven by a reduction in spot transaction turnover. FX swaps (US$2.4 trillion per day) continued to be the most actively traded FX instruments, followed by spot transactions (US$1.7 trillion per day). Similar to the previous survey in 2013, US dollar remained the dominant trading currency in the global FX markets, followed by euro, Japanese yen and British pound. The survey also shows a further significant rise in the turnover of renminbi which became the eighth most actively traded currency from the ninth in the 2013 survey. For currency pairs, US dollar/euro continued to be the most actively traded pair, accounting for 23% of the global FX turnover, followed by US dollar/yen (18%).
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