9 Sep 2013

BIS Triennial Report : $5.3 trillion of Foreign Exchange and $2.3 trillion of Interest Rate Derivatives per day

Every three years the Bank for International Settlements publishes its Triennial Central Bank Survey of Foreign Exchange and Derivatives Market activity. They have just released the preliminary figures for the data collected in April 2013. 

You can read the details of the Foreign Exchange activity here and the Over the Counter (OTC) Interest Rate Derivatives are here.

Here are some highlights
Trading in foreign exchange markets averaged $5.3 trillion per day in April 2013. This is up from $4.0 trillion in April 2010 and $3.3 trillion in Apr il 2007. FX swaps were the most actively traded instruments in April 2013, at $2.2 trillion per day, followed by spot trading at $2.0 trillion.  
Trading in OTC interest rate derivatives markets averaged $2.3 trillion per day in April 2013. This is up from $2.1 trillion in April 2010 and $1.7 trillion in April 2007. Interest rate swaps were the most actively traded instruments in 2013, at $1.4 trillion per day, fo llowed by forward rate agreements at $0.8 trillion. 
If we assume that there are about 250 trading days in a year, this would add up to a mouth-watering $1335 trillion in foreign exchange per year, and a futher €575 trillion of Interest Rate Swaps. Together that's $1.9 quadrillion.

So, let's see. Suppose we impose a 0.05% financial transaction tax on that. It could raise nearly $1 trillion a year. You could do quite a lot with that. 

It would also be a very neat way for Central Banks to take the heat out of the economy if and when they decide that it would be much better to directly inject new debt free money into the economy by giving it directly to citizens (see my recent posts). You could inject $1 trillion into the economy via citizens bank accounts, and remove the same amount with an FTT.  This would completely avoid any risk of inflation. 
 
And it would allow a net transfer of money from those people who can think of nothing better to do with their money than move it back and forth between dollars, euros, sterling and yen hundreds of times a second, to the people who could actually do something sensible with it.

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