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Foreign exchange and derivatives transactions: Germany remains in top quarter internationally

Foreign exchange and derivatives transactions: Germany remains in top quarter internationally

01.09.2016 | Deutsche Bundesbank DE

As a trading centre, Germany still ranks in the top quarter in an international comparison. Turnover in foreign exchange trading has increased slightly, while transactions involving interest rate derivatives have taken a sharp downward turn. These findings were revealed by the survey of foreign exchange and derivatives market activity conducted in April 2016 and covering all major global financial centres. The survey was carried out by central banks in 52 countries in consultation with the Bank for International Settlements (BIS).

Foreign exchange market turnover in Germany

For the survey period April 2016, the participating banks reported turnover in foreign exchange spot and forward contracts amounting to a total of US$2.4 trillion after eliminating doubly recorded transactions between domestic reporting institutions. The average daily turnover for the 21 trading days in April 2016 was US$116 billion, of which one-fifth (US$23 billion) was accounted for by spot transactions and the remaining four-fifths by forward contracts (outright forwards, foreign exchange swaps, currency swaps and foreign exchange options).

The daily trading volume thus rose by 5% from the level reported in the last survey (April 2013). At the same time, the diverging trend continued. Whereas foreign exchange swaps saw an 8% increase to US$85 billion per trading day, turnover in spot transactions recorded a 4% drop to US$23 billion. Turnover in the other forward contracts held steady at a low level, overall. The increase in foreign exchange forwards in Germany is consistent with the global trend identified by the BIS. For spot transactions, however, the global decline is significantly more pronounced than the slight decrease in Germany. As a result, total turnover from foreign exchange transactions in Germany ultimately went up, while the global results compiled by the BIS show a slight dip.

The breakdown of the currencies traded showed little change from April 2013. The euro's share of turnover decreased marginally by one percentage point, amounting to 58% in April 2016. The euro/US dollar combination accounted for 44% of transactions, an increase of 2 percentage points, whereas the share of transactions involving euro exchanges against other currencies dropped from 17% to 14%. However, it should be noted that the euro depreciated by 13% against the US dollar between the reporting months, which led to lower values in US dollars when converting these foreign exchange transactions. The share of transactions in which US dollars were exchanged for other currencies held steady at 38% of turnover. Turnover in foreign exchange business was predominantly generated in transactions with non-residents, accounting for an unchanged figure of 86%.

OTC trading in interest rate derivatives 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 2016. Compared with April 2013, turnover from interest rate instruments fell to US$659 billion (notional amount) and hence to less than one-third. This development in the German results stands in contrast to the global trend of continued turnover growth. A key factor in the change in the German figures is the sharp decline in forward rate agreements, with turnover slumping from US$1.6 trillion in April 2013 to US$260 billion in April 2016. At an unchanged high level of 92% of turnover, interest rate derivatives deals were primarily concluded with non-residents.

Overall results for all countries

The survey is conducted at three-year intervals with the objective of providing comprehensive and internationally comparable data on the scope and structure of the global foreign exchange markets, thus aiding in a better understanding of the international financial markets. The results for Germany were compiled by the Bundesbank from the data reported by 36 major 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. In these results, double counting of cross-border transactions is eliminated in order to allow an accurate appraisal of the total volume of international foreign exchange trading and derivatives business.

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