The global foreign exchange market

London's position as the most important international centre for foreign exchange and derivatives trading has benn weakened by stiff competition from other major financial players. The Financial Times reported this on Friday, citing a report from the Bank for International Settlements (BIS).

It said the City of London accounted for 38% of global foreign exchange turnover in April 2022, down 5pc from 2019, when the previous report was released. At that time, London's figure was as high as 43%. In the OTC derivatives markets, its share has fallen to 46% compared to 51% three years ago.

Experts call the financial consequences of the UK's exit from the EU (Brexit) the main reason for London's reduced influence on the foreign exchange markets.

The main beneficiaries of London's losses, according to the researchers, were New York and Singapore.

The BIS said the rise may have been partly due to volatile market conditions in April, when the survey was conducted, because there were severe imbalances in trading stocks. This meant that banks needed to "unload them more often in the inter-dealer market".

The inter-dealer market, where brokers facilitate trading between banks and other financial institutions, accounts for 40 per cent of the spot market and 54 per cent of the derivatives markets. London's share went largely to the US and Singapore. BIS data is based on where trades are initiated or traded electronically.

OTC derivatives trading fell 19 per cent globally from 2019, to $5.2 trillion a day, mainly because the swaps market began to move away from the tarnished Libor credit rate. Traders had little use for forward rate agreements, which they use to manage their exposure to LIBOR rate movements. FRAs turnover fell 74% to $500bn.