Slow start to the new year...

Last week's foreign exchange volume statistics illustrate a continuation of refrained trading activity, with a year-on-year decline reported by electronic trading platforms.

Last Thursday, interdealer broker Icap reported that average daily spot FX volume on EBS for January was $149.1 billion. This is 37% down on $238.3 billion in January 2008, and down again on $152.6 billion recorded for January 2007. On the plus side, it is still up on January 2006, when average daily volumes were $133.2 billion.

Similarly, the Chicago Mercantile Exchange reported a 23% drop in average daily FX contract volume, to 460,486 at a notional $58.9 billion in January this year versus the same period last year. Average daily volumes in forex contracts traded in January were also down on January 2007's 494,000 but up on 2006 figures, when 384,000 were traded. Notional values for the period were not available.

Meanwhile, CLS reported that average daily volume of instructions settled in January was 515,237, up 9% on December last year, while average daily value of instructions was $2.97 trillion, down 5% on December last year. This compares with the changes seen during January 2008 versus December 2007, when average daily volume in payment instructions rose 26% while average daily values were down 2.4%.

However, CLS noted that participation in CLS continued to grow significantly during 2008, with a total of 4,354 third parties and funds using the service by year-end, a rise of 98% from the beginning of the year. There was steady growth in the number of banks, non-bank financial institutions and corporate participants to current levels of 320 banks, 62 non-bank financial institutions and 27 global multinational corporations. Individual funds registered with CLS grew 99% in 2008 to 3,945 active funds by the end of December.

Lower volumes aside however, some good news came out of Deutsche Bank's FX business last week. Despite a Q4 e2.7 billion loss in its sales and trading business for the debt and related products division at Deutsche Bank, the German dealer highlighted that losses were partially offset by record revenues in the FX and money markets businesses, which benefited from both exceptionally strong client flows and favourable positioning.

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