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Global FX Markets "Vibrant, Growing" at $66 Trillion
Global FX Markets "Vibrant, Growing" at $66 Trillion
Global FX Markets "Vibrant, Growing" at $66 Trillion
Global FX Markets "Vibrant, Growing" at $66 Trillion
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Global FX Markets "Vibrant, Growing" at $66 Trillion

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The global foreign exchange derivatives markets appear "appear quite vibrant and growing to new heights of activity," with swap contracts and other over-the-counter instruments boasting a record total …

The global foreign exchange derivatives markets appear "appear quite vibrant and growing to new heights of activity," with swap contracts and other over-the-counter instruments boasting a record total value of $66.6 trillion at the middle of this year, CME Group analysts Lori Aldinger and John Labuszewski wrote in a report.

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  • 1. CURRENCY MARKETSFX Markets Gaining MomentumNOVEMBER 15, 2012Lori Aldinger John W. LabuszewskiManager Managing DirectorResearch & Product Development Research & Product Development312-930-2337 312-466-7469lori.aldinger@cmegroup.com jlab@cmegroup.com
  • 2. The Bank for International Settlements (BIS) (JPY). Appreciation in the value of the USD vs.publishes information regarding the total other major currencies during the first half of 2012outstanding value of over-the-counter (OTC) and was the key driving factor in this decline.exchange-traded derivatives positions on a semi-annual basis. But the Swiss franc (CHF) was particularly hard hit with market values declining approximately 24% inBIS’s November 2012 release, covering data the first half of 2012, relative to a 30% decline inthrough June 2012, suggests that FX derivatives, the previous six month period. This developmentincluding OTC or interbank; and, exchange-traded reflects market expectations that future CHF/EURmarkets, appear quite vibrant and growing to new values would be constrained by the cap establishedheights of activity. by the Swiss National Bank.Interbank Markets – The interbank, or over-the- Exchange-Traded Markets – Exchange-traded FXcounter, FX derivative markets includes forwards derivatives, including futures and option markets,and forex swaps; currency swaps; and, currency similarly gained momentum during the first half ofoptions. The outstanding notional value of the 2012. The outstanding notional value (or dollarmarketplace advanced to $66.6 trillion as of June value of open interest) of all exchange-traded FX2012. This figure represents a 5.2% advance over derivatives advanced 5.5% from $308 billion inthe December 2011 mark of $63.3 trillion. Further, December 2011 to $325 billion in June 2012. Still,this eclipses the previous high-water mark of $64.7 this falls a bit short of the previous peaks of $389trillion established as of June 2011 and the previous billion, $347 billion and $390 billion established inpeak of $63.0 trillion as of June 2008. June 2011, June 2010 and June 2008, respectively. Notional Value Interbank FX Market Notional Value FX Derivatives $70 $70 $450 Exchange Traded FX (Billions USD) $65 $400 Interbank FX (Trillions USD) $60 $60 $350 $50 $55 $300 $40 $50 $250 $45 $30 $200 $40 $20 $35 $150 $30 $100 $10 $25 $50 $0 $20 $0 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Jun-03 Mar-04 Sep-05 Jun-06 Mar-07 Sep-08 Jun-09 Mar-10 Sep-11 Jun-12 Dec-04 Dec-07 Dec-10 Forwards & Forex Swaps Currency Swaps Options Interbank FX Exchange-Traded FX Source: Bank for International Settlements CME Group FX Source: Bank for International Settlements & CME ResearchGross market values declined 13.2% from $2.6 But the notional value of CME Group FX contractstrillion in December 2011 to $2.2 trillion in June advanced to $205 billion by June 2012, up 7.9%2012. 1 This decline in market values was felt with from $190 billion in December 2011. This $205similar effect across contracts denominated in U.S. billion reflects a new all-time high in the notionaldollars (USD), Euros (EUR) and the Japanese yen value of outstanding CME FX contracts. Note that the December 2011 figure of $190 billion represents the previous high. Thus, CME Group FX contracts1 Gross market values measure the cost of replacing represent some 63.0% of the entire exchange- existing contracts or to put it another way, unrealized traded FX marketplace as of June 2012. gains or losses on outstanding interbank or OTC FX derivative contracts. The BIS also reports on gross credit exposures, which measures reporting dealers’ CME marketshare of the entire FX derivatives exposure after taking into account legally enforceable marketplace including interbank and exchange- trade netting agreements.1 | FX Markets Gaining Momentum | November 20, 2012 | © CME GROUP
  • 3. traded derivatives stands at 0.31% in June 2012, up FX marketplace may be referenced in Table 1 below.from 0.30% in December 2011. Gross market values in interbank or OTC FX derivatives may be referenced in Table 2 below.Detailed figures regarding outstanding notionalvalues in the interbank or OTC and exchange-tradedCopyright 2012 CME Group All Rights Reserved. Futures trading is not suitable for all investors, and involves the risk of loss. Futuresare a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than theamount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affectingtheir lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade.All examples in this brochure are hypothetical situations, used for explanation purposes only, and should not be considered investmentadvice or the results of actual market experience.”Swaps trading is not suitable for all investors, involves the risk of loss and should only be undertaken by investors who are ECPs within themeaning of section 1(a)12 of the Commodity Exchange Act. Swaps are a leveraged investment, and because only a percentage of acontract’s value is required to trade, it is possible to lose more than the amount of money deposited for a swaps position. Therefore, tradersshould only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted toany one trade because they cannot expect to profit on every trade.CME Group is a trademark of CME Group Inc. The Globe logo, E-mini, Globex, CME and Chicago Mercantile Exchange are trademarks ofChicago Mercantile Exchange Inc. Chicago Board of Trade is a trademark of the Board of Trade of the City of Chicago, Inc. NYMEX is atrademark of the New York Mercantile Exchange, Inc.The information within this document has been compiled by CME Group for general purposes only and has not taken into account thespecific situations of any recipients of the information. CME Group assumes no responsibility for any errors or omissions. Additionally, allexamples contained herein are hypothetical situations, used for explanation purposes only, and should not be considered investment adviceor the results of actual market experience. All matters pertaining to rules and specifications herein are made subject to and are supersededby official CME, NYMEX and CBOT rules. Current CME/CBOT/NYMEX rules should be consulted in all cases before taking any action.2 | FX Markets Gaining Momentum | November 20, 2012 | © CME GROUP
  • 4. Table 1: Outstanding Notional Value of FX Derivatives Markets (Billions USD) Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 OTC or Interbank FX Derivatives Interbank FX contracts $62,983 $50,042 $48,732 $49,181 $53,153 $57,796 $64,698 $63,349 $66,645 Forwards and forex swaps $31,966 $24,494 $23,105 $23,129 $25,624 $28,433 $31,113 $30,526 $31,395 Currency swaps $16,307 $14,941 $15,072 $16,509 $16,360 $19,271 $22,228 $22,791 $24,156 Options $14,710 $10,608 $10,555 $9,543 $11,170 $10,092 $11,358 $10,032 $11,094 Exchange Traded FX Derivatives All Exchange-Traded FX $390 $254 $225 $292 $347 $314 $389 $308 $325 CME FX Contracts $172 $96 $107 $147 $172 $174 $176 $190 $205 Source: Bank for International Settlements (BIS) and CME Group Research Table 2: Gross Market Value of Interbank or OTC FX Derivatives (Billions USD) Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Foreign exchange contracts $2,262 $4,084 $2,470 $2,070 $2,544 $2,482 $2,336 $2,555 $2,217 Forwards and forex swaps $802 $1,830 $870 $683 $930 $886 $777 $919 $771 Currency swaps $1,071 $1,633 $1,211 $1,043 $1,201 $1,235 $1,227 $1,318 $1,184 Options $388 $621 $389 $344 $413 $362 $332 $318 $262 Source: Bank for International Settlements (BIS)3 | FX Markets Gaining Momentum | November 20, 2012 | © CME GROUP

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