The global foreign exchange (FX) market would likely be able to handle Greece’s exit from the euro, although the disruption may cause a spike in trading volumes, a new report suggests.

According to a new report from Greenwich Associates, the breakup of the Euro “is unlikely to materially disrupt the normal functioning of global foreign exchange trading”. The report says the primary reason is that the global FX market is “perhaps the most liquid, robust and well-functioning market on the planet”.

Nevertheless, it does expect that such a significant event will have a real effect on market volumes, practices and possibly even functionality. Indeed, it predicts that the exit of Greece and/or one or more ‘periphery countries’ from the euro zone “would likely produce a temporary spike in trading volumes as markets react and adjust”.

Greenwich Associates estimates that volume spikes during the ensuing months after an announced Greek exit would inflate global foreign exchange trading volumes for the following year by approximately 7.5%, and by roughly 5.5% in subsequent years.

And, it expects that overall trading activity “would likely normalize in relatively short order, leaving the market to revert to recent historic growth rates within a span of less than five years.”

“It is important to remember that, although any split in the euro would represent a historic event that would create massive, temporary shifts in global FX trading, the drachma accounted for only 0.6% of pre-euro European FX volumes and 0.5% of global volumes,” it says.

However, it also suggests that a more extreme breakup of the euro zone would probably inflate global FX trading volumes by 25%. “Trading volumes in subsequent years would be affected by the moderating influences of potential decreases in market liquidity, a slow-down in global commerce and potential disruptions in global bond issuance,” it adds.

Additionally, the report notes that various measures by European policymakers to avoid a Greek exit, or default, have at least given markets, governments, banks, and investors time to prepare for the possibility.

Europe’s banking system is more prepared to face a possible default than it was just a year ago, Greenwich suggests, as regulators have forced banks to deleverage and boost capital, and the added time has provided an opportunity to reduce exposures to periphery debt. “By achieving this important goal, the EU has greatly reduced the risks of the one event that could pose a real risk to the proper functioning of foreign exchange markets — widespread bank failures,” it says.