Everyday areas of foreign exchange (FX) workflow such as price discovery, risk management, and algorithmic trading performance stand to gain from a deeper understanding of average trade size trends in spot FX.
This paper examines CLS, central bank, and Bank for International Settlements data to illustrate how average trade size in the over-the-counter (OTC) spot FX market varies longitudinally, by time of day, by FX pair, and by factors such as counterparty type and use of prime brokers.
Sample questions answered in this study:
Forex Datasource analyzed CLS market data from early 2018, which is representative of market conditions globally for spot FX and for the currency pairs included in the study at the time when the data was captured. The CLS data sample corresponds to a 24-hour trading activity period for January 8, 2018, including 342,142 gross spot FX trades, parsed by currency pair, base currency notional amounts, and time of day. The CLS reporting of volume and trade ticket underwent a methodology change in 2017 that brought it in line with that used by the Bank for International Settlements (BIS). To normalize the dataset, Forex Datasource converted trade notionals to US dollars. To delve into longitudinal trends, we drew additional insights from central bank semi-annual FX surveys and BIS triennial FX surveys since 2005.
LIST OF CHARTS AND TABLES
Chart 1. Spot FX Share of All OTC FX Trades, Combined U.S. and U.K. activity
Chart 2. CLS – Daily Spot FX Activity, 2006-Q1 2018
Chart 3. Trade Size Comparison by FX Product, October 2017
Chart 4. Spot FX Trade Size Over Time, 2010-2017
Chart 5. Prime Brokered Spot FX Volume, U.S. and U.K., 2010-2017
Chart 6. Prime Brokered FX Trades, U.S. and U.K., 2010-2017
Chart 7. Spot FX Trade Size by Select Counterparties, 2010-2017
Chart 8. CLS Intraday Data – Top-5 FX Pairs by Share of Spot FX Trades, January 2018
Chart 9. CLS Intraday Data – Top-5 FX Pairs by Share of Spot FX Trades, January 2018
Chart 10. Volume-Weighted Spot FX Average Trade Size, All CLS FX Pairs, January 2018
Chart 11. EUR/USD Average Trade Size Intraday, January 2018
Chart 12. USD/JPY Average Trade Size Intraday, January 2018
Chart 13. GBP/USD Average Trade Size Intraday, January 2018
Chart 14. AUD/USD Average Trade Size Intraday, January 2018
Chart 15. USD/CAD Average Trade Size Intraday, January 2018
Chart 16. NZD/USD Average Trade Size Intraday, January 2018
Chart 17. EUR/JPY Average Trade Size Intraday, January 2018
Chart 18. EUR/GBP Average Trade Size Intraday, January 2018
This report helps guide strategy of buy-side FX traders, algo developers, and sell-side FX risk managers setting spot FX trade sizes in a 24H/5.5 day market.
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