Canadian foreign exchange trading volumes increased 70% from 2006 to 2007, with growth spanning almost all products, including swaps, forwards and emerging markets currencies, according to a report from Greenwich Associates.

The year-to-year growth of the Canadian foreign exchange business easily surpassed the growth in global trading volume, which rose 30% from 2006 to 2007, continuing a steady run of double-digit annual growth.

Greenwich said that FX volume increases in Canada were generated mainly from financial institutions. “Likewise, banks and investment managers are increasing their presence in FX at a global level as they diversify portfolios with international assets and the market continues to attract new users ranging from hyper-active hedge fund traders to a growing cohort of retail investors,” it said. “Much of this new business is being facilitated by electronic trading technology, which provides institutional, corporate and retail players alike with instant access to deep pools of liquidity at very low cost. “

For the second year in a row, Scotia Capital was the top trading firm, Greenwich said, as it “took advantage of the booming Canadian FX market to consolidate its strong position in terms of overall penetration among large corporate and financial users of foreign exchange.”

RBC Capital Markets was a close second to Scotia, it reported, with CIBC World Markets growing quickly and adding a significant number of new trading relationships last year.

In terms of quality of service delivered to Canadian FX clients, greenwich found, “Scotia Capital, RBC Capital Markets and CIBC World Markets continue to form the top tier of the market as measured by the Greenwich Quality Index, outdistancing the next tier of competitors by a wide margin. “

“The competitive landscape of Canadian foreign exchange dealers is increasingly feeling the effects of electronic trading,” says Greenwich Associates consultant Woody Canaday. “RBC Capital Markets has achieved the highest level of market penetration in eFX, followed by State Street’s third party site, FX Connect, and CIBC World Markets, which increased its market penetration level from year to year.”