May 2016 Forex Industry Metrics: Summer Doldrums Setting In?

Perhaps there’s some truth to the “Sell in May and go away” phenomenon as trading volumes slumped last month partly due to several market participants taking some time off. Based on the latest metrics from brokers and exchanges all over the globe, the forex industry resumed its slump after a shaky recovery in April.

Data from Interactive Brokers Group, an automated electronic broker and worldwide market maker, daily average revenue trades (DARTs) fell 3% on a monthly basis in May but recorded a 4% year-over-year gain. Also on an upbeat note, the number of client accounts ticked 1% higher from April to May and 15% up from the same period last year.

However, retail forex broker GTX of Gain Capital didn’t see such an active month, as volumes decreased 12% from the previous month. On a year-over-year basis, trading volumes were down 1% in May. These figures are at their lowest since December 2015, possibly due to subdued trading activity leading up to and during the Memorial Day U.S. long weekend.

In Japan, the Tokyo Financial Exchange reported yet another month of weaker trading volumes. Click 365 Exchange FX margin contracts slumped 4.8% in May but showed an annual increase of 8.9%. Total trading volumes based on the year-on-year change column revealed that much of the activity was focused on USD/JPY, AUD/JPY, and GBP/JPY.

Data from the Tokyo Financial Exchange

Data from the Tokyo Financial Exchange

A quick review of the main market themes for the month indicates that BOJ jawboning and sales tax hike delay whispers pushed yen pairs around. In addition, the RBA decision to cut interest rates in their May statement has spurred market interest for AUD/JPY while Brexit-related updates continued to contribute to GBP/JPY volatility.

It’s also worth noting that CAD/JPY recorded a 110.4% jump in trading volume for May, presumably because of crude oil rallies regaining the spotlight that month on the wildfires in Alberta, the supply shocks in Nigeria and Venezuela, and the upcoming OPEC meeting.

Moving on, institutional electronic forex trading venue Hotspot FX recorded its second slowest month of trading volumes since 2012 with the May ADV down 9% from $25.6 billion to $23.4 billion. On the other hand, another institutional FX platform FastMatch posted a 5% monthly gain in ADV at $11.4 billion. On a year-over-year basis, this marked a 37% jump in activity from May 2015.

With the summer season starting in the U.S. do you think we’ll see a deeper slowdown this month? Or will Fed rate hike hopes and the EU referendum keep volatility in play? Don’t be shy to share your thoughts in our comments section!