The $4 Trillion Question: What Explains FX Growth Since the 2007 Survey?

Abstract

Daily average foreign exchange market turnover reached $4 trillion in April 2010, 20% higher than in 2007. Growth owed largely to the increased trading activity of “other financial institutions”, which contributed 85% of the higher turnover. Within this customer category, the growth is driven by high-frequency traders, banks trading as clients of the biggest dealers, and online trading by retail investors. Electronic trading has been instrumental to this increase, particularly algorithmic trading.

JEL Classification: F31, G12, G15, C42, C82