Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity 1998 – Final results

Updated 10 May 1999

INTRODUCTION

The geographical coverage of the triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity was further expanded in 1998 (from 26 countries in 1995 to 43 countries). At the same time, in order to reduce the reporting burden, a few changes were introduced in the coverage of derivatives. Thus, since exchange-traded business is regularly collected by the BIS from the exchanges themselves, the reporting framework was limited to over-the-counter markets. In addition, information pertaining to amounts outstanding differed from the preceding survey both in the reporting date (end- June rather than end-March) and in the reporting basis (worldwide consolidation versus location of reporters). These changes were made to ensure consistency with the new regular consolidated derivatives market statistics in the G10 countries, which were introduced at end-June 1998.

The results of the latest triennial survey should be put in the context of the financial environment prevailing in 1998. In particular, sharp swings in global market sentiment were recorded between the first and second halves of the year. Whereas the earlier period represented the final phase of a long and significant build-up of positions in a broadening range of market segments, the Russian crisis in the summer precipitated an unprecedented wave of unwinding of positions, especially in foreign exchange and fixed income markets. In addition, the run-up to the single European currency was associated with various strategies, tending in the main to boost transactions in the earlier part of the year (namely before the announcement concerning the initial participants in European monetary union at the beginning of May), whereas greater caution prevailed in the period immediately preceding the introduction of the euro on 1 January 1999. The disappearance of a number of currencies and their replacement by the euro will have also considerably modified the configuration of markets and related trading strategies. The new regular reporting of consolidated derivatives market statistics will therefore act as an important complement to the present triennial survey in assessing the evolution of risk exposure and management over time.