4 Oct 2011

Global Financial Transactions at 9.5 petadollars

The Bank for International Settlements recently published their Statistics on payment, clearing and settlement systems in the 23 CPSS countries for 2006-2010, although the data is still preliminary. I downloaded the comparative tables and compiled all the data from the 5 tables that provide numbers for the value of transactions that have been processed.  Transactions peaked in 2008 at $9,513,494,000,000,000 . Call that 9.5 million billion dollars if you like but I think that we really need to be using petadollars for these sorts of sums.
The financial crisis led to a drop to a mere 7.7 petadollars in 2009. The total for 2010 of 7.3 petadollars are still provisional, and in fact is bound to be a lot higher when the final numbers are published in December. In particular, the values for the UK lack the data for LCH.Clearnet.Ltd which reported 1.58 petadollars in 2008 and nearly 1 petadollar in 2009. I think that we can presume that we can add at least another petadollar of trading for 2010. We could well be around 8.5 petadollars when then full numbers are in.

The fact is that these numbers are massively underestimated. Many of the entries in the tables have had "Not available"  ("nav") for the entire period since 2006. Among the culprits you can find the London Stock Exchange, the American Stock Exchange, and many trading institutions in Australia, India, Saudi Arabia and Sweden.

And what about the other countries that don't report anything? For example the other 20 countries in the European Union that don't bother to provide data? Why doesn't the European Union oblige every country to provide the numbers? And why is the London Stock Exchange, and the City of London given the right to do as much Under-the-Counter trading as they want with no controls? And what about trading in Credit Default Swaps, CDOs, ETFs etc etc? Has anyone got the foggiest clue about what the true levels of activity are?

When people try to claim that the financial markets are lacking liquidity, I frankly have serious problems in believing them. The money is there. You cannot do something like 6 petadollars of trading per year without liquidity.

Note that applying the 0.1% FTT proposed by the EU last week could produce truly eye-watering amounts of revenue . Either that, or it would drastically reduce speculation on the financial markets. Both options are fine with me.

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