Global Slump Freezes FX: Banks Face 15% Revenue Fall

Global Slump Freezes FX: Banks Face 15% Revenue Fall

Time Stamp: August 23, 2023 5:51 PM
Global Slump Freezes FX: Banks Face 15% Revenue Fall PlatoBlockchain Data Intelligence. Vertical Search. Ai.

The
downturn in market volatility is impacting currency trading desks, leading to
reduced margins for banks and slowing the recovery following the economic
turbulence of the Covid-19 pandemic. BCG Expand Research reported that revenue
from foreign-exchange trading within the top 100 banks fell 15% during the
first half of 2023. If this trend persists, it could be the second revenue
decline in three years.

A recent
decrease in trading activity has been observed in banks like Goldman Sachs
Group Inc. and BNP Paribas SA, contributing to lower results in areas, such as
fixed income, currency, and commodities. Moreover, Goldman cut hiring for the
third time in May due to the market slowdown.

This is
partly because the decrease in currency volatility has impacted comparisons
with previous years, following events like Russia’s invasion of Ukraine and
major central bank adjustments. Current mixed economic data and the shift of
central banks into a more observant role have left traders uncertain, leading to
reduced currency swings and tighter margins.

Uncertain
macroeconomic conditions have led some clients to pull back from the currency
trading market, leading to a decline of 7% in spot FX volumes in the first half
of 2023, as cited by Expand. Specific client activity has seen varying changes:
hedge fund activity has decreased 3%, real money activity remained stable,
and corporate client volumes have increased 6%.

These
fluctuations in client activity illustrate the current instability in
the currency trading environment, reflecting broader uncertainties in the
global economic landscape. Additionally, increased electronic trading has had
an effect and a decline in client participation in the market.

In the
first six months of 2023, banks’ FX revenues totaled $31.3 billion, which is down from
$36.9 billion in the prior year. Last year was overall a record year for banks,
when they earned $66.6 billion from forex operations, compared to the previous
record of $65.2 billion in 2022

However,
some Latin American currencies have shown robust growth in traded volumes,
particularly the Brazilian real, Chilean peso, and Columbian peso, each growing 10-20% during the year’s first half.

Institutional Spot FX
Activities Return Mixed Performance

The figures
from institutional spot foreign exchange trading during July confirm the thesis
presented in the first part of the article. Various trading platforms like Cboe
FX, Deutsche Börse’s 360T, FXSpotStream, and Click 365 reported mixed outcomes.
These recent statistics are consistent with prior data, further validating the
observed trends.

In the
U.S., Cboe FX, a prominent platform for spot forex trading , saw its total
volume dip by 4% to $922 billion, which is down from $965 billion a month earlier.
FXSpotStream, a provider located in New Jersey offering multibank price
streaming for FX spot and swaps, witnessed a similar decline of 1.2% to $1.37
trillion, which is down from $1.39 trillion seen in the previous year.

Over in
Europe, Euronext FX, a leading electronic network for spot FX trading,
experienced a reduction of 4% to $492 billion, as the Euronext-operated
platform reported a decrease in institutional demands, with volumes falling
from $514 billion.

Moreover,
total volumes for spot and derivatives trading on centralized exchanges (CEXs) also
saw a slump of 12% to $2.36 trillion in July, marking the lowest monthly trading
volume so far this year. This information is based on the most recent exchange
review report from CCData, a provider of digital assets data.

The
downturn in market volatility is impacting currency trading desks, leading to
reduced margins for banks and slowing the recovery following the economic
turbulence of the Covid-19 pandemic. BCG Expand Research reported that revenue
from foreign-exchange trading within the top 100 banks fell 15% during the
first half of 2023. If this trend persists, it could be the second revenue
decline in three years.

A recent
decrease in trading activity has been observed in banks like Goldman Sachs
Group Inc. and BNP Paribas SA, contributing to lower results in areas, such as
fixed income, currency, and commodities. Moreover, Goldman cut hiring for the
third time in May due to the market slowdown.

This is
partly because the decrease in currency volatility has impacted comparisons
with previous years, following events like Russia’s invasion of Ukraine and
major central bank adjustments. Current mixed economic data and the shift of
central banks into a more observant role have left traders uncertain, leading to
reduced currency swings and tighter margins.

Uncertain
macroeconomic conditions have led some clients to pull back from the currency
trading market, leading to a decline of 7% in spot FX volumes in the first half
of 2023, as cited by Expand. Specific client activity has seen varying changes:
hedge fund activity has decreased 3%, real money activity remained stable,
and corporate client volumes have increased 6%.

These
fluctuations in client activity illustrate the current instability in
the currency trading environment, reflecting broader uncertainties in the
global economic landscape. Additionally, increased electronic trading has had
an effect and a decline in client participation in the market.

In the
first six months of 2023, banks’ FX revenues totaled $31.3 billion, which is down from
$36.9 billion in the prior year. Last year was overall a record year for banks,
when they earned $66.6 billion from forex operations, compared to the previous
record of $65.2 billion in 2022

However,
some Latin American currencies have shown robust growth in traded volumes,
particularly the Brazilian real, Chilean peso, and Columbian peso, each growing 10-20% during the year’s first half.

Institutional Spot FX
Activities Return Mixed Performance

The figures
from institutional spot foreign exchange trading during July confirm the thesis
presented in the first part of the article. Various trading platforms like Cboe
FX, Deutsche Börse’s 360T, FXSpotStream, and Click 365 reported mixed outcomes.
These recent statistics are consistent with prior data, further validating the
observed trends.

In the
U.S., Cboe FX, a prominent platform for spot forex trading , saw its total
volume dip by 4% to $922 billion, which is down from $965 billion a month earlier.
FXSpotStream, a provider located in New Jersey offering multibank price
streaming for FX spot and swaps, witnessed a similar decline of 1.2% to $1.37
trillion, which is down from $1.39 trillion seen in the previous year.

Over in
Europe, Euronext FX, a leading electronic network for spot FX trading,
experienced a reduction of 4% to $492 billion, as the Euronext-operated
platform reported a decrease in institutional demands, with volumes falling
from $514 billion.

Moreover,
total volumes for spot and derivatives trading on centralized exchanges (CEXs) also
saw a slump of 12% to $2.36 trillion in July, marking the lowest monthly trading
volume so far this year. This information is based on the most recent exchange
review report from CCData, a provider of digital assets data.

Time Stamp:

More from Finance Magnates