Traders return after the summer, but levels still lower than last year.
LeapRate's Retail FX Volume Index, sponsored by Leverate, rose by 7% in September to $179 billion per day. While a healthy monthly increase, retail FX trading levels were coming off a low base due to consecutive 10.5% and 5% decreases in the index during the July and August summer months. As such, retail FX trading activity remains well below last year's levels. Specifically, the September index sits 9% below last year September's $197 billion daily (see interactive chart below).
LeapRate's Retail FX Volume Index is a monthly measure of global trading activity in the retail FX sector.
Sources: LeapRate research, monthly and quarterly volume reports of various Forex ECNs and Forex brokerage firms.
We actually expected September to see a larger increase than just 7%. The summer months are traditionally slow, with traders spending at least some time on vacation. And combining that with the pickup in currency volatility in September -- e.g. with the bellwether EURUSD pair bouncing in a wide range between the 1.25-1.32 range, after spending most of July and August in a tight 1.21-1.23 band -- led us to expect a double-digit increase in the index in September.
But it seems as though some investors remained on the sidelines, or just didn't up their trading volumes as much as expected. In addition, institutional and larger HNW retail clients -- which have been representing an increasing part of FX brokers' volumes -- seem to remain on the sidelines leading up to the U.S. elections, despite the near-term rise in volatility.
Gerald Segal, LeapRate Managing Director commented, "While a 7% rise in volumes is certainly better than what we saw in July and August, it was below our expectations of a larger recovery in retail FX trading volumes. The rise in volatility in September didn't seem to fully re-awaken retail or institutional traders, following a summer-long lull in trading. Even faster-growing regions, such as Australia, remained less active than expected."
The LeapRate Retail FX Volume Index, sponsored by Leverate, is a monthly measure of activity, stated in billions of dollars per day. It is calculated using proprietary formulas developed by LeapRate. The data input into the model are based on examining monthly and/or quarterly activity levels put out by various retail FX brokerage firms; similar activity levels announced by other FX aggregators such as Forex ECNs (e.g. ICAP, Thomson Reuters, Hotspot FX) and FX settlement firms (e.g. CLS Group); as well as anecdotal evidence we encounter as part of our general research activities in the Forex sector.
LeapRate is a leading research and information firm serving the global FX industry. Through its partnership with Dow Jones, LeapRate publishes the LeapRate-Dow Jones Forex Industry Report, a comprehensive review of the retail FX industry. Other LeapRate services include Best-of-the-Web FX Research and our daily FX Research email for traders, the Forex Yellow Pages, Forex Exec Search job listings, and our Approved List of regulated FX brokerage firms worldwide. For more information please see our website at www.leaprate.com.