October 2016 Forex Industry Metrics: Mixed Results, But Mostly Down

Forex trading activity had a really solid run in September, but market players were unable to sustain these volumes in the following month. Only a handful of brokers reported small gains in October while majority recorded declines.

Data from international derivatives marketplace CME Group indicated that foreign exchange volume averaged 771,000 contracts per day during the month, up 5% from the same period last year. This was spurred by a 78% year-over-year jump in pound futures contracts and significantly higher average daily volumes (ADV) in emerging market currencies, such as the Brazilian real (109%), Russian ruble (41%), Mexican peso (36%), and South African rand (77%).

Institutional trading volume saw marginal declines, with forex ECN FastMatch reporting a 1% monthly decline to $13.6 billion in ADV for October. GTX, the institutional arm of Gain Capital Holdings, managed to keep trading volumes steady from September at $11.5 billion ADV. However, Hotspot FX saw an 11% drop in ADV from $28.3 billion to $25.3 billion in October.

In contrast, multi-bank aggregation service FXSpotStream enjoyed a 10.7% jump in October trading volumes to $17.7 billion in ADV. Now that’s a pretty decent rise in activity among leading global banks such as Goldman Sachs, Morgan Stanley, Standard Chartered, UBS, Citi, and HSBC. On a year-over-year basis, this translates to a whopping 24.5% rise in volumes. Markets operator ICAP plc also reported that monthly FX volumes ticked higher by 2.6% for the month.

Moving over to exchanges, forex volumes in Moscow Exchange dipped 6.1% on a monthly basis and 15.6% compared to the same month last year. In the Tokyo Financial Exchange, the total trading volume of Exchange FX Margin Contracts on the Click365 platform ticked 4.5% higher for the month and 10.5% up from October 2015.

Data from the Tokyo Financial Exchange

Data from the Tokyo Financial Exchange

The breakdown of currency pairs reveals that the CHF/JPY pair saw the strongest pickup in volumes for the month while NZD/JPY, GBP/JPY, and EUR/USD also enjoyed gains. On a year-over-year basis, GBP/USD raked in a jaw-dropping 832.9% jump in volumes, followed by CHF/JPY and GBP/JPY. Yen pairs actually enjoyed a bit more volatility than usual in the past month, as the Japanese currency’s rallies seemed to fizzle out and reversals materialized, particularly for CHF/JPY.

As for retail brokers, Exness reported a 4% monthly decline in client trading activity for October to $208.9 billion. Meanwhile, Japanese forex broker Monex Group saw a drop of 5.7% in October trading volumes even as the total number of accounts ticked slightly higher by 0.29%.

What’s next?

These mixed results are understandable, given how traders probably eased up a bit after stepping on the gas pedal back in September. Brexit uncertainties remained in play as expected, driving up volumes for pound pairs in some parts of the world while likely leading most retail traders to sit on their hands and play it safe for the time being.

Moving forward, November has proved to be off to an action-packed start with all the U.S. elections hoopla that’s likely to keep investors on their toes for the rest of the month or year… or the next four years. A number of key policy decisions and top-tier releases are still on the docket, but the new U.S. administration’s economic agenda and overall market sentiment could take the spotlight for the next few weeks.