CME Group, which runs the world’s largest derivatives marketplace, announced that FX contract volumes (mainly Eurodollar futures contracts) in its system were down by 9% in August from July to an average of 731,000 contracts daily — and that was after July was down by 24% from June. Indeed, this was CME’s slowest month for FX since 2009 (save for last December’s seasonally low number, which was about the same as this August).
While CME’s reported volumes are futures contracts, they typically are a good predictor of retail / spot volumes as well. Those markets are interconnected, and are typically driven by the same catalyst — namely volatility.
In the LeapRate Retail FX Volume Index, sponsored by Leverate, July and August volumes are typically about 5-10% lower than average due to seasonal issues (i.e. summer vacations in the northern hemisphere), but volatility in both July and August this year was also somewhat lower than May and June, which saw a 10% and 3% (respectively) increase in global FX volumes in the index.
We should learn more when Forex ECNs such as ICAP, Hotspot FX, and Thomson Reuters release August numbers in the coming days and weeks — most interesting to see will be the Hotspot FX numbers, to ascertain whether or not the problems at its parent company Knight Capital Group, which occurred at the very beginning of August, affected volumes at all at Hotspot. Stay tuned…
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.