Cboe FX reports strong rebound in May volumes, up 27% YoY

abdelaziz Fathi

Cboe’s institutional spot FX platform today announced its trading volume for the month ending May 2022, which marks a mild rebound after a steep fall in April.

Cboe

Cboe FX disclosed a total trading volume of $870 billion, up 12 percent on a month-over-month basis from $777 billion in April‎. Excluding March’s $1.02 trillion turnover, this figure is the best reading for the exchange’s monthly turnover since March 2021. In addition, it was higher by 27 percent year-over-year when weighed against $683 billion in May 2021.

The exchange’s institutional FX trading venue saw its average daily trading volumes amounting to $39.5 billion in May 2022, up 7 percent month-over-month from $37 billion the previous month.

On a year-over-year basis, the ADV numbers released by Cboe FX, formerly Hotspot, illustrated stronger performance, rising by 22 percent when weighed against $38 billion a year earlier.‎

Cboe FX turnover crossed the $1 trillion milestone in response to Russia’s invasion of Ukraine. The recent pullback, however, raises serious questions about how deep a possible pullback in volumes will be, though it should not cause panic.

The historical precedents, most recently the Covid-19 crisis, show that FX market liquidity falls during periods of market stress; and that the impact of post-crisis regulatory change often brings adverse consequences on FX traders’ activity.

Cboe strengthens FX business

If the history tells anything at all, the increase in FX volatility, reflected by sharp swings, makes traders tend to pare back the size of their positions in order to avoid the sizeable risks on the downside.

Interestingly, the current pattern mimics what happened during the 2008 financial crisis, which initially saw an increased FX turnover that was attributed to a ‘hot potato’ effect, where traders were keen to pass on any risk as quickly as possible. This was seen recently when investors liquidated nearly everything for cash, including the traditional safe havens like gold and yen, only driving up the US dollar.

Liquidity management has been a key focus at Cboe FX over the past few years, coupled with adding extensive analytics capabilities. The company operates an electronic foreign exchange trading venue that permits certain institutions to enter into spot transactions with their preferred counterparties to meet their specific trading needs.

Dubbed ‘Cboe FX Point,’ the direct execution model provides institutional investors with a flexible range of options, including the ability to create custom, relationship-based connections.

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