Foreign Exchange Trade

Table of Contents

  1. Foreign Exchange Statistics in 2016 (reported by the Bank for International Settlements)
  2. How it Works (plus an update in April 2019)
  3. BIS Who is the Bank for International Settlements (and what are SDRs)
  4. Who are the Top 10 Currency Traders
  5. Who are the Top 10 Banks Worldwide (by total assets)
  6. What are the Top Six Countries for Capital Flight Controls
  7. More Foreign Exchange FAQs (Domestic Banks and Correspondent Banks)

Foreign Exchange Statistics in April 2016

Foreign Exchange Trading increased from a daily average of $US 1 trillion in 2001 to $US 5 trillion by 2013.

Click here for a list of currency abbreviations for the BIS 161 official currencies.

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Most traded currencies by value
Currency distribution of global foreign exchange market turnover
Rank ▲▼ Currency Abbrev. % daily share
1 United States dollar USD ($) 88%
2 Euro EUR (€) 31%
3 Japanese yen JPY (¥) 22%
4 Pound sterling GBP (£) 13%
5 Australian dollar AUD ($) 7%
6 Canadian dollar CAD ($) 5%
7 Swiss franc CHF (Fr) 5%
8 Chinese yuan CNY (¥) 4%
9 Hong Kong dollar HKD ($) 2%
10 Swedish krona SEK (kr) 2%
11 New Zealand dollar NZD ($) 2%
12 Mexican peso MXN ($) 2%
13 Singapore dollar SGD ($) 2%
14 Norwegian krone NOK 2%
15 Korean won KRW 2%
16 Turkish lira TRY (Turkish lira) 1%
17 Russian ruble RUB (₽) 1%
18 Indian rupee INR 1%
19 Brazilian real BRL 1%
20 South African rand ZAR 1%
21 Danish krone DKK 1%
22 Polish zloty PLN 1%
23 New Taiwan dollar TWD 1%
24 Thai baht THB 0.4%
25 Malaysian ringgit
 
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MYR 0.4%
26 Hungarian forint HUF 0.3%
27 Saudi riyal SAR 0.3%
28 Czech koruna CZK 0.3%
29 Israeli new shekel ILS 0.3%
30 Chilean peso CLP 0.2%
31 Indonesian rupiah IDR 0.2%
32 Colombian peso COP 0.2%
33 Philippine peso PHP 0.1%
34 Romanian leu RON 0.1%
35 Peruvian sol PEN 0.1%
36 Other OTH 2%
37 xxx Total xxx 200%

How Foreign Exchange Trading Works (plus an update in April 2019)

Most exchanges occur via sales desks in five jurisdictions: the United Kingdom - London (37%), the United States - New York (19%), Singapore (7%), Japan - Tokyo (7%) and Hong Kong SAR Special Admin Region (7%).

The markets open 22:00 GMT on Sunday (8:00am on Monday, Brisbane time). They trade continuously until 22:00 GMT on Friday (that's 5:00pm New York time).

This report first began in 1989. In that year the three major currencies when buying or selling were US dollars (90%), Japanese yen (28%), and German marks – DEM Deutsche marks (27%). The fledgling euro – XEU was just 1%.

Update April 2019

In April 2019, the daily average increased to $US 6.6 trillion. Most currency levels were the same, the US Dollar remained on 88%, though the Japanese Yen dropped 5 percentage points to 17%, and the Hong Kong $ rose to 4%.
In terms of sales desk activity, London's share of daily volumes rose to 43% while the United States' share shrank to 17%. In Asia, growing volumes in Hong Kong offset weakness in Singapore and Tokyo.
Click here for Reuters report. Click here for BIS report.


Bank for International Settlements and SDRs

Click here for the source document of the report above, published by BIS, the Bank for International Settlements (used by central banks), based in Basel, Switzerland. The BIS started by intergovernmental agreement in 1930, trading in Swiss gold francs, set up initially to assist the German government with its WW1 reparations. During WW2 it acted as a neutral central bank, providing significant back-channel communications between the Allied and Axis powers, and thus survived WW2, though a number of Germans associated with the bank were convicted as war criminals. After the war it assisted the central banks in Europe and also Japan, in becoming a global central bank. Click here for more of its history. Click here for its current membership.

Click here for the latest financial statements at the BIS, valued in SDRs, where 1 SDR is currently equal to $US1.43, and click here for its current formula.

In Australia's Reserve Bank Annual Report in June 2020, $47 billion was held in seven currencies (USD 55%, EUR 20%, then JPY, GBP, CAD, CNY and KRW 5% each), $6 billion was held in SDRs, $3 billion in IMF reserve, and $4 billion was held in gold.

Click here for more about SDRs as defined by the International Monetary Fund, based in Washington DC.


Top 10 Currency Traders

The following table comes from https://en.wikipedia.org /wiki/ Foreign exchange market

 
Top 10 currency traders % of overall volume, June 2019
RankName Market share
1

United StatesJPMorgan

9.81%

2

GermanyDeutsche Bank

8.41%

3

United StatesCiti

7.87%

4

United KingdomXTX Markets (Non-Bank Liquidity Provider)

7.22%

5

SwitzerlandUBS

6.63%

6

United StatesState Street

5.50%

7

United StatesHC Tech (Non-Bank Liquidity Provider)

5.28%

8

United KingdomHSBC

4.93%

9

United StatesBofA Securities

4.63%

10

United StatesGoldman Sachs

4.50%


Top 10 Banks Worldwide

The following list of Top 10 Banks came from Wikipedia's list of Top 75 Banks worldwide with additional notes from Investopedia

Top 6 Banks outside China December 2018
Rank Name Total Assets ($ trillion)
1 Mitsubishi UFJ Financial Group
This is a Japanese bank that offers consumer banking, as well as business and private banking. This is also an investment bank. It offers asset management and real estate banking.
$2.785 trillion
2 JPMorgan Chase & Co. (JPM)
It is based in New York, but it is a multinational bank.
It is involved in investment services, asset management, wealth management, and securities.
$2.615 trillion
3 HSBC Holdings (HSBC)
This is a bank based in England. The bank has offices in 80 countries and has 1,800 locations in the U.K. It provides private banking and consumer finance, along with corporate banking and investment services.
$2.558 trillion
4 BNP Paribas
This French bank has offices in 75 countries, including the United States. This bank was ranked second among banks in the euro zone in 2016.
$2.357 trillion
5 Bank of America (BAC)
Bank of America is a U.S. bank that offers services for personal banking, small businesses, mid-sized businesses, and large corporations. It offers investment services in addition to its deposit and checking accounts. The bank has nearly 5,000 retail outlets.
$2.338 trillion
6 Credit Agricole Group
This is the second French bank on the list. This bank has a history of working with farmers. It is part of a network of 39 French banks.
$2.117 trillion

Top 4 Banks in China

1. Industrial & Commercial Bank of China
This is the largest bank in the world when measured by assets. It has $4.009 trillion in total assets. The bank’s revenues came in at $105.4 billion in 2018.
Though this is a commercial bank, it is state-owned. The bank provides loans, financing for businesses, credit cards, as well as money management for high-net-worth individuals and companies. The bank also offers money market vehicles, investing opportunities and exchange and transfer services.

2. China Construction Bank Corp.
This is the second Chinese bank. It offers corporate banking, which deals with credit, company e-banking, credit lines, and commercial loans. The personal banking segment offers personal loans, credit cards, deposits and wealth management for individual investors.
The bank also operates a Treasury sector that deals with money markets, debt securities, and currencies. The China Construction Bank has assets of $3.4 trillion.

3. Agricultural Bank of China
This Beijing bank has branches across China, plus London, Tokyo, New York and Sydney, Australia. Not only is it the third-largest bank on our list, but it is also one of the 10 largest companies in the world. Agricultural Bank of China is state-owned.
The bank deals with small farmers and large agricultural wholesale companies. It also works with non-agricultural companies. Its largest growth segment is mid-sized companies. The bank has assets of $3.235 trillion.

4. Bank of China
The Bank of China offers investment banking, insurance and investing services. It also provides personal loans, credit card services, debit cards, mortgages, asset and liability management, and insurance. Assets total $2.992 trillion.


Top 6 Countries Enforcing Capital Controls

Regarding capital flight and efforts by governments to reduce its departure in the form of gold or international currencies, see the extract below from themerkle.com.

Top 6 Countries Enforcing Capital Controls
JP Buntinx
themerkle.com
March 12, 2017

In the financial world, consumers are often tricked into believing they can exert control over their money at any given time. That is far from the case, as a lot of regions actively enforce capital controls to reduce the amount of money leaving the national economy. Below is a brief overview of some countries actively enforcing these controls.

1. CHINA

Anyone who has been following financial news over the past few years has heard about China’s capital control measures. Buying gold and foreign currency is very limited for both consumers and enterprises. Using the gambling hub of Macau to bypass these controls is no longer a viable option either, as that corridor has been closed. New controls have been imposed since the end of 2015, including the addition of specific conditions to futures contracts. Cross-border money movements are being monitored closely as well, ensuring no one has an easy time getting money out of the country. Shorting the Chinese Yuan as an international investor is met with aggressive currency intervention.

2. ARGENTINA

When one talks about a country dealing with hyperinflation, Argentina will come to mind rather quickly. Strict capital controls have been apparent since 2011. Using foreign exchange reserve to make international payments is no longer an option. Instead, all exporting companies need to repatriate all of their export earnings back to the national economy. Buying US dollars in Argentina is curbed as well, and non-residents have limited access to Argentine Pesos. All bank customers have their tax identification numbers submitted to the federal tax agency as well.

3. RUSSIA

Living in Russia, of all places, is not all that appealing to foreigners. That is only understandable, as the country’s government seems to favor isolationism and capital controls. The latest iteration of those controls revolves around forcing state-run exporting companies to bring their forex assets back to the October 2015 levels. Additionally, all companies must report to the central bank every single week.

4. TAIWAN

Taiwan has been feeling the effects of the 2008 financial crisis. In fact, that crisis could not have come at a worse time for Taiwan, as things were already looking bad years prior. In 2010, government officials saw no other choice but to limit access to certain bank deposits for foreign investors. Once again, this form of capital control will limit the amount of foreign money entering the economy.

5. INDONESIA

Although quite a few people travel to Indonesia every year, the country is not as open-minded toward foreigners as one might think. To be more precise, there are some capital controls going on in the country which make the financial situation more complicated than need be. It is required to go through a one-month minimum holding period for specific securities traded in Indonesia. This is done to counter day trading, yet it also forces investors to be very sure about how they want to diversify their portfolio.

6. BRAZIL

Most people know Brazil as the home of excellent football and the Samba. Unfortunately, the local economy has been struggling for several years now, and hyperinflation is a real threat in Brazil. As of 2009, the Brazilian government enforces capital controls to ensure enough money remains in local hands. Foreigners who purchase financial Brazilian assets must pay a tax to do so.

** End of Report

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