The Global Interbank System for FOREX

Proportion of foreign exchange dealing that is speculative

No one has quantified exactly what proportion of foreign exchange deals are exclusively speculative, and what percentage relate to business transactions, although a figure of 95% is frequently cited for the former. A transaction in which, say, a corporation places an order for foreign exchange with a dealer typically gives rise to a chain of subsequent inter-dealer transactions, until a dealer willing to hold the asset associated with the other side of that transaction is found. Estimates of the ratio of transactions to customer orders are as high as ten to one.

Inter-bank business amounted to 83% of turnover in London 1998. The share of business with other financial institutions such as pension funds amounted to 9.5%, while business with non-financial institutions was only 7%.

It is estimated that 80% of all worldwide currency transactions involve a time horizon of seven days or less, and more than 40% of two days or less.

Who are the players in foreign exchange dealing?

Investment banks and the investment banking divisions of clearing banks conduct most trading. Banks trade on behalf of their customers and on their own account, to manage their assets and liabilities, and to hedge against foreign currency exposures. Dealing which is not driven by customer demand is known as proprietary trading. HSBC, NatWest and Barclays are the principal players among the British clearing banks, while, worldwide, American banks dominate the foreign exchange markets. The Bank of England 1998 survey reported that the combined market share of the top ten principals was 50%, and the top 20 was 69%. North American principals possess a market share of 49%; British banks of 15%; other European banks of 18%; and Japanese banks of 7%. Banks' customers include pension funds, insurance companies, hedge funds, mutual funds, unit trusts, other banks, businesses and corporations.

Who profits from foreign exchange trading?

The Top 100 Banks

Top 100 Banks by market share
1999	1998		Estimated share (%)
1	1	Citibank/Salomon Smith Barney	7.75
2	2	Deutsche Bank	7.12
3	3	Chase Manhattan Bank	7.09
4	*	Warburg Dillon Read	6.44
5	4	Goldman Sachs	4.86
6	**	Bank of America	4.39
7	6	JP Morgan	4.00
8	5	HSBC	3.75
9	11	ABN Amro	3.37
10	8	Merrill Lynch	3.27
11	21	Credit Suisse First Boston	3.11
12	15	SEB	2.68
13	9	NatWest Global Financial Markets	2.63
14	16	Royal Bank of Canada	2.60
15	13	Morgan Stanley Dean Witter	2.29
16	20	Barclays Capital	1.88
17	39	Svenska Handelsbanken	1.74
18	17	Standard Chartered Bank	1.59
19	62	MeritaNordbanken	1.48
20	44	Bankers Trust	1.45
21	22	Bank of Montreal	1.38
22	26	Crédit Agricole Indosuez	1.21
23	94	Westdeutsche Landesbank	1.15
24	31	Dresdner Kleinwort Benson	1.03
25	14	AIG International	0.93
26	43	Generale Bank	0.91
27	29	Société Générale	0.90
28	32	Banque Nationale de Paris	0.78
29	10	Industrial Bank of Japan	0.78
30	25	Commerzbank	0.76
31	28	Royal Bank of Scotland	0.66
32	27	First Chicago NBD	0.63
33	24	Daiwa International Trust Bank	0.61
34	23	Den Danske Bank	0.59
35	47	ING Barings	0.52
36	35	Rabobank	0.49
37	82	Swedbank	0.47
38	41	CIBC Wood Gundy	0.46
39	80	Banque Internationale à Luxembourg	0.42
40	30	Flemings	0.42
41	42	Lloyds Bank	0.37
42	63	Westpac Banking Corp	0.36
43	40	Bank of New York	0.35
44	34	State Street Bank & Trust	0.35
45	56	ANZ Banking Group	0.35
46	--	State Bank of New South Wales	0.34
47	92	National Australia Bank	0.33
48	36	Bank of Tokyo-Mitsubishi	0.33
49	110	Unibank	0.32
50	51	Bank of China	0.31
51	65	Toronto Dominion Bank	0.31
52	--	KBC Bank	0.30
53	77	Crédit Lyonnais	0.27
54	112	Basler Kantonalbank	0.27
55	33	Sumitomo Bank	0.27
56	68	Bank of Nova Scotia	0.27
57	79	Mellon Bank	0.24
58	60	Bank Austria Creditanstalt Group	0.23
59	78	Leonia Bank	0.23
60	71	Commonwealth Bank of Australia	0.22
61	--	Zürcher Kantonalbank	0.21
62	66	Banque Paribas	0.20
63	58	Sakura Bank	0.17
64	--	Mitsui Trust & Banking	0.16
65	96	Standard Bank	0.16
66	117	BHF-Bank	0.16
67	52	American Express Bank	0.16
68	84	Republic National Bank of New York	0.15
69	140	Natexis Banque	0.15
70	37	Bank of Scotland	0.15
71	--	Hypovereinsbank	0.15
72	--	Union Bank of California	0.15
73	144	Jyske Bank	0.14
74	54	Raiffeisen Zentralbank	0.13
75	70	Fuji Bank	0.13
76	145	DBS Bank	0.12
77	76	IFX	0.12
78	111	First National Bank of South Africa	0.12
79	165	Brown Brothers Harriman	0.11
80	171	Delta Lloyd Bank	0.10
81	114	Harris Bank	0.09
82	18	Bear Stearns	0.09
83	95	Bayerische Landesbank	0.09
84	127	Mitsubishi Trust & Banking	0.09
85	--	Banque Générale du Luxembourg	0.09
86	104	Sumitomo Trust & Banking	0.09
87	83	BankBoston	0.09
88	--	Banca Toscana	0.07
89	–	Saudi International Bank	0.07
90	143	Sal Oppenheim	0.06
91	123	DG Bank	0.06
92	57	Nomura Trust Bank	0.06
93	–	Arab Bank Plc	0.06
94	–	Donaldson Lufkin & Jenrette	0.06
95	75	National Bank of Kuwait	0.06
96	107	Allied Irish Banks	0.05
97	103	First National Bank of Boston	0.05
98	105	Toyo Trust & Bank	0.05
99	–	Banca Intesa	0.05
100	161	Banco Bilbao Vizcaya	0.05
* SBC Warburg Dillon Read ranked 7, UBS 19
** Bank of America ranked 12, NationsBank 73
† Kredietbank ranked 67
†† Bayerische Vereinsbank ranked 49, Hypobank 90

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Last update June 19, 2006