The Basics

Twenty-four Hour Forex Volume Distribution

The question of volume in the forex market is a common one seeing as there is no one central aggregation of the data. I happen to work for a company that has a major forex dealing platform in it, so I get to see some stuff that isn’t available to the public. One of those things is how volume is distributed throughout the day.

Here’s a graph of EUR/USD volume based on Thursday’s trading (times noted are in GMT).

The pattern is pretty obvious. The volume in the Europe/US overlap is the most significant. Outside of that it’s markedly lower.

And to provide a perspective on a currency that would be thought to have a more regional bias, here’s AUD/USD.

Here we see more of an Asian time frame volume spike, but still we have to look at the US morning as the biggest volume period.

Of course this is just one day – a day when there were important data releases in both the US and European mornings, which is reflected in the spikes we see in EUR/USD. Other days will show different distributions. The primary pattern of heaviest volume in the overlap will basically always be there, though.

Trading News

I have access to forex volume data!

And you don’t! 🙂

We’re working on something in the office whereby we get access to volume data from the folks who run the Reuters forex dealing platforms so we can use it in our market analysis. Right now I can only see the current day’s data to a given point in time (we’re working on expanding that). The chart below shows Tuesday’s distribution actual traded volume by price level for GBP/USD.

Click for full-sized image

By way of comparison, here’s the price time distribution for GBP/USD on the day. You’ll notice the similarity of the two distributions, but also the differences in the upper part of the day’s range.

Trading News

Forex Volumes Figures and New Treasury Margins

A while back the margin requirements on silver were raised in a fairly well publicized fashion as a result of increased volatility in that market. It was announced on Friday (and repeated through the markets this morning) that the CME Group will be hiking margin requirements on Treasury futures as of the end of business today. This has created considerable chatter, but doesn’t look likely to have much real impact. As I heard at least one market participant note, while the increase if large on a percentage basis (20%), it is small in terms of the actual notional amount (1%).

I’ve said before that I don’t consider margin requirement changes as things that turn markets or cause major disturbances. Most major players in these markets are not leveraged to the point where this sort of things makes a huge difference. If you’re only leveraged at 5 or 10 to 1, adding a percentage point to your margin requirement isn’t going to move the needle.

In other news, the results of the April forex trading volume surveys done by the central banks and regional monetary authorities are all available. Here are the links: