Cboe FX volume continues downward trend in July

abdelaziz Fathi

Cboe’s institutional spot FX platform reported ‎its trading volumes for the month ending July 2022, which saw a ‎notable drop to hit its lowest point since April.

Cboe

During July 2022, Cboe FX disclosed a total trading volume of $802 billion, down -8 percent on a month-over-month basis from $874 billion in June 2022‎. This figure was however higher by 12 percent year-over-year when weighed against $719 billion in July 2018.

In addition, the exchange’s institutional FX trading venue saw its average daily trading volume amounting to $38.1billion in July 2022, down 4 percent month-over-month from $39.7 billion in June 2022.

On a year-over-year basis, the ADV numbers released by Cboe FX, formerly Hotspot, illustrated stronger performance, rising by 17 percent when weighed against $32.6 billion a year earlier.‎

Cboe FX turnover crossed the $1 trillion milestone earlier this year 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.

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.

Cboe strengthens FX business

According to conclusions made by one of the BIS reports, there was a marked increase in the amount of FX turnover during the lead-up to the financial crisis, aided by low volatility and a high appetite for risk. These factors reversed a few months later when traders became increasingly risk-averse, and market volatility spiked higher.

Interestingly, the current pattern mimics what happened during the crisis period, 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.

Read this next

Digital Assets

Kraken exits Middle East, closes UAE office

Digital currency exchange Kraken will close down its operations in Abu Dhabi, UAE and lay off the majority of its team focused on the Middle East and North Africa.

Industry News

CFTC comments on ION Cleared Derivatives issues after Russian-linked hack

“The ongoing issue is impacting some clearing members’ ability to provide the CFTC with timely and accurate data. As this incident unfolded, it became clear that the submission of data that is required by registrants will be delayed until the trading issues are resolved.”

Industry News

FCA took down 14 times more misleading ads in 2022 thanks to technology

The FCA has made significant improvements to the digital tools it uses to find problem firms and misleading adverts. These improvements have enabled it to work through a much larger number of cases compared with 2021.

Executive Moves

HKEX appoints ex-Goldman Sachs Matthew Cheong to lead platform’s focus on derivatives

“He has worked for a number of the world’s leading investment banks and his experience will be invaluable to HKEX as we continue to enhance our derivatives product offerings and build on our innovative and robust platform business, connecting capital with opportunities.”

Digital Assets

Zodia Custody and SBI Digital Asset Holdings launch JV for crypto asset custodian in Japan

“Zodia Custody is both proud and excited to be working with SBI DAH to help set up SBI Zodia Custody; the first tier 1 crypto asset custodian for institutions in Japan.”

Digital Assets

Paxos opens R&D center in Israel to focus on transaction signing and crypto custody security

“Paxos is looking to expand its team in Israel in 2023 and beyond, giving engineers the opportunity to work on cutting-edge financial products and shape the future of the global economy.”

Executive Moves

Stash appoints Liza Landsman as CEO to further grow investing app

Stash is an investing and banking app with over 2 million active subscribers. Its subscription plans start at just $3 a month, and offer a range of products including investing, banking, education, and advice.

Institutional FX

Invast Global ramps up its offering with 10 soft commodity CFDs

Sydney-based prime-of-prime provider Invast Global has expanded its offering with the addition of ten soft commodity CFDs, which increases their index and commodity CFD offering to 35 instruments.

Retail FX

FF Simple and Smart Trades says Goodbye to CySEC authorization

The Cyprus Securities and Exchange Commission (CySEC) confirmed that it has wholly withdrawn the Cyprus Investment Firm (CIF) licenses of FF Simple and Smart Trades Investment Services Ltd.

<