The Bank for International Settlements released the results of a survey of foreign exchange and derivatives market activity, which found trading activity up strongly.

In April, 54 central banks and monetary authorities participated in the survey, collecting data on turnover in traditional foreign exchange markets – those for spot transactions, outright forwards and foreign exchange swaps – and in over-the-counter currency and interest rate derivatives.

It found that turnover in traditional foreign exchange instruments increased by an unprecedented 71% to US$3.2 trillion. Although this was broad-based across instruments, growth in FX swap turnover was particularly strong, up by 82% in April. The share of transactions between reporting dealers and other financial institutions, which mainly comprise hedge funds, mutual funds, pension funds and insurance companies, increased by seven percentage points to 40%.

Additionally, activity in OTC derivatives markets continued to expand at a rapid pace. Average daily turnover of interest rate and non-traditional foreign exchange contracts increased by 71% to US$2.1 trillion in April. Turnover of foreign exchange options and cross-currency swaps more than doubled to US$300 billion per day. Slower growth was recorded in the much larger interest rate segment, where average daily turnover increased by 64% to US$1.7 trillion.

In November, the BIS plans to publish the preliminary global results of the second part of the triennial survey covering open contracts outstanding in OTC derivatives markets. The final global results of both parts of the 2007 triennial survey are expected to be released in December.

The Bank of Canada released its share of the results too. It found that the turnover of traditional FX transactions totalled US$1.2 trillion, compared with over US$1.1 trillion in April 2004, yielding an average daily turnover in 2007 of US$59.8 billion (over 20 business days), compared with an average of USUS$53.9 billion per day (over 21 business days) in 2004, an increase of 11%.

The average turnover for currency swaps and OTC foreign exchange options declined to US$4.2 billion per day from US$5.4 billion in April 2004. While currency swaps more than doubled to US$1.6 billion, foreign exchange options declined by 46% to US$2.6 billion per day.

With respect to single-currency interest rate derivatives, including forward rate agreements, interest rate swaps, and OTC options, average daily turnover in April totaled US$20.6 billion, compared with US$12.1 billion in April 2004, an increase of 70%.