Moore, Michael J., Schrimpf, Andreas and Sushko, Vladyslav (2016) Downsized FX markets : causes and implications. BIS Quarterly Review . ISSN 1683-0121.

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Abstract

For the first time in 15 years, FX trading volumes contracted between two consecutive BIS Triennial Surveys. The decline in trading by leveraged institutions and "fast money" traders, and a reduction in risk appetite, have contributed to a significant drop in spot market activity. More active trading of FX derivatives, largely for hedging purposes, has provided a partial offset. Many FX dealer banks have become less willing to warehouse risk and have been re-evaluating their prime brokerage business. At the same time, new technologically driven non-bank players have gained firmer footing as market-makers and liquidity providers. Against this backdrop, FX trading is becoming increasingly relationship-driven, albeit in an electronic form. Such changes in the composition of market participants and their trading patterns may have significant implications for market functioning and FX market liquidity resilience going forward.1

Item Type:	Journal Article
Divisions:	Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	BIS Quarterly Review
Publisher:	Bank for International Settlements
ISSN:	1683-0121
Official Date:	11 December 2016
Dates:	Date Event 11 December 2016 Published 1 December 2016 Accepted
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Open Access (Creative Commons)

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