Foreign exchange trading and derivatives transactions in Germany see significant growth in activity

Germany as a trading centre is seeing strong growth in foreign exchange trading and derivatives market activity, according to the latest survey of foreign exchange trading turnover and derivatives transactions. This survey, which took place in April 2022 in all the major global financial centres, was conducted by central banks in 52 countries in consultation with the Bank for International Settlements (BIS). The uptick in activity was driven primarily by business relocations from the United Kingdom to Germany in connection with Brexit. Turnover from foreign exchange trading in Germany grew by almost half compared with 2019 and by more than the international average. Transactions in interest rate derivatives rose sharply as well, bucking the international trend. In the euro area, Germany, together with France, plays a leading role in foreign exchange trading and OTC trading in interest rate derivatives.

Turnover from foreign exchange trading in Germany

For the April 2022 reporting month, the participating banks reported turnover in foreign exchange spot and forward contracts totalling US$3.5 trillion after adjustment for local inter-dealer double-counting. Daily turnover for the 19 trading days in April 2022 came to an average of US$184 billion, of which foreign exchange swaps accounted for just under 70% (US$127 billion), spot transactions for around 20% (US$38 billion) and other forward contracts (outright forwards, cross-currency swaps and foreign exchange options) for the remainder.

The daily trading volume was up by 47% on the previous survey from April 2019. The main reason for this is the relocation of business to Germany as a result of restructuring within some banking groups in response to Brexit. Foreign exchange swap activity grew by 32%, while turnover from spot contracts almost doubled. Turnover in the other forward contracts held steady at a low level, overall.

There was no major change in the structure of the currencies traded in Germany compared with April 2019. The euro accounted for 71% of turnover in April 2022, and the euro/US dollar currency pair also remained steady, at 47% of transactions, as did the share of transactions where the euro was one side of trades, at 24%. It should be noted that the euro lost around 4% of its value against the US dollar between the April 2019 and April 2022 reporting months, which means that when these foreign exchange transactions are converted they have lower values in US dollars. The share of transactions in US dollars against other currencies increased by 2 percentage points to 28% of turnover. Up slightly at 86%, turnover in foreign exchange trading was generated predominantly with non-resident counterparties.

OTC interest rate derivatives turnover in Germany

For the survey on OTC trading in interest rate derivatives, the banks also reported on their OTC transactions in interest rate swaps, interest rate options and forward rate agreements in April 2022. Turnover in interest rate instruments saw a remarkably strong increase, climbing from US$1.1 trillion in April 2019 to US$5.2 trillion (nominal amount). A key factor in the change in the German figures is the considerable growth shown by interest rate swaps, where turnover grew almost eightfold from US$496 billion in April 2019 to US$4.0 trillion in April 2022. Here again, business relocations to Germany and new start-ups in connection with Brexit played a key role in this regard. Non-resident counterparties accounted for 90% of turnover in interest rate derivatives, which is more or less unchanged against April 2019.

Aggregate global results

The survey is conducted at three-year intervals with the objective of providing comprehensive and internationally comparable data on the scope and structure of global foreign exchange markets, thus aiding in a better understanding of cross-border linkages in financial markets. The results for Germany were compiled by the Bundesbank from the data reported by 37 banks which account for around 95% of these transactions in Germany.

Simultaneously with all participating national central banks, the BIS is today publishing a statement about the aggregated survey results for all participating countries. These results are adjusted for cross-border inter-dealer double-counting so as to provide a non-overlapping account of the total volume of international foreign exchange trading and derivatives market activity.