CLS Bank reported that the average number of daily foreign exchange payment instructions rose 7.1 percent in October from the previous month, data from FX settlement system showed.
The average volume of payment instructions was at 672,665 last month from 627,954 in September.
On the year, volumes were down 7.6 percent after a record 727,934 last October in the wake of the collapse of Lehman Brothers. The average daily value came in at $3.76 trillion in October, up 5.0 percent from the previous month.
This is encouraging news, as it shows that institutional investors are slowly re-entering the forex market. Institutions are long term value investors and shy away from volatility – something retail investors thrive on as speculators.
Three months ago I reported a drop of 25% in institutional Forex trading volume as reported by the Foreign Exchange Committee. If CLS’s report is an indicative one this should mean that the volumes are climbing back to peak levels and this is good news for retail Forex market as well as it might fuel a collateral growth in the retail market as well which is not growing as rapidly as it used to.
This is an important development. The comparison I would be interested in is between November 2009 and November 2008 – comparing two “normal”. Last October was mad, and it probably won’t return. But I do believe that the crisis had a long term, positive effect on trading volumes.