Forex market turnover 2014

Recent trends in the foreign exchange and money markets

LONDON The foreign exchange market's status as the world's largest, built up over decades of rampant globalization, deregulation and growth in financial services, is unlikely to be relinquished any time soon. But the glory days are over. Overall market volume and employment levels at the biggest banks trading currencies are shrinking, as tighter bank regulation, the fading emerging market boom and a secular slowdown in world growth and trade take their toll.

Industry figures show the number of traders employed in Europe at the top 10 foreign exchange banks is down 30 percent over the last three years. Figures from the Bank of England and New York Federal Reserve last month showed that trading volume has fallen to its lowest level in three years.

According to financial industry analytics data firm Coalition, the top 10 FX banks alone operating in Europe employed people on their G10 European FX trading desks last year. That's down 30 percent from the employed in The vast majority of those frontline positions are in London.

Both inside and outside the UK capital, countless other jobs in back office areas servicing the market have also likely disappeared for good even if quantifying that is trickier given the multiple areas these people work across. Trading desks at some of the biggest banks in London and New York -- the largest centers in foreign exchange -- are grappling with lower volumes in actively traded currencies like the yen, Swiss franc and Australian dollar over the past year.

Spurred by huge losses for many from the Swiss franc's surge in January last year, big banks have cracked down on the number of smaller hedge fund-style operations they issue credit to and the leverage ratios they give others, halting the growth of highly leveraged speculative trading.

The trend was highlighted in a recent survey by central banks in Britain and the United States that showed daily volumes were down 21 percent in April to October from a year earlier in London and 26 percent in New York.

The foreign exchange market, which is used as a snapshot of global trade and economic activity, is the world's biggest financial market, and had been growing steadily for decades. But a market-rigging scandal that erupted in and led to several banks being fined billions of dollars and dozens, possibly hundreds, of traders around the world suspended or fired has cast a long, dark shadow over the industry.

More regulatory changes, prompted by the global financial crisis, has reduced their ability and willingness to take trading risks. Besides contending with higher capital costs and rising costs of doing business as spending on risk management, surveillance and technology rises, banks can no longer trade currencies on their own behalf. Analysts say relatively subdued volatility in the foreign exchange market has played a role in keeping volumes low in recent months.

Spot volumes have fallen and so did demand for derivative products such as currency options given there can be little demand to hedge if currencies are not going anywhere. Traders are banking on some volatility spilling over from unsettled financial markets and a slowdown in China to force a major rethink of where asset prices, inflation, growth and central bank policy are headed this year.

Additional reporting by Patrick Graham in London and Gertrude Chavez-Dreyfuss in New York; Editing by Ruth Pitchford. LONDON Oil fell to seven-month lows on Wednesday, set for its largest price slide in the first half of any year for the past two decades, as investors discounted evidence of strong compliance by OPEC and non-OPEC producers with a deal to cut global output.

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