Magazine article American Banker

Foreign Futures Taking Bigger Slice of Exchange Trades

Magazine article American Banker

Foreign Futures Taking Bigger Slice of Exchange Trades

Article excerpt

CHICAGO -- Foreign currency futures at Chicago's International Monetary Market now account for almost 10% of the total volume of foreign exchange trading in the United States, the Federal Reserve Bank of New York has found.

In some cases, the impact of the futures exchange is even greater: In April 1983 its accounted for 25% of all trading in the Swiss franc and 12% of all turnover in the Japanese yen. In contrast, its share of the overall foreign exchange market three years earlier was 6.7%.

Between March 1980 and April 1983, average daily volume on the International Monetary Market grew twice as rapidly as taht in the underlying foreign exchange interbank market, to $2.3 billion a day from $1.1 billion, the New York Fed noted in its quarterly review. Interbank volume rose to $23.3 billion a day from $15.7 billion.

Commercial banks have contributed significantly to this expansion, it said. "In addition to their arbitrage activities, many banks now regard the IMM as another source of liquidity for the foreign exchange market. …

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