About the Study
Conducted by research company ClientKnowledge on behalf of CME Group, the survey polled 893 market participants, including 310 banks, 352 money managers and 231 ‘non-traditional’ money managers or ‘leveraged’ traders including hedge funds and Commodity Trading Advisors (CTAs). Participants were drawn from a global distribution. The research was conducted between June and August 2008.

• Download the Global FX Survey Market Report (PDF)
• Watch Derek Sammann, Head of Global FX, speak about the findings
• View the Press Release

Summary of Key Findings
Recent credit constraints have led to an increased focus on counterparty and systemic risks and greater interest in efficient execution.

Of More Concern Over Previous Year

• Counterparty risk was the biggest worry for banks when supplying e-pricing, up to 84 percent from 72 percent last year.
• A liquidity crunch, in regard to assessing systemic risk, was a worry for 43 percent of banks
• Insolvency emerged as a key concern, at 35 percent immediately prior to the Lehman Brothers insolvency, up from 15 percent a year ago

Of Less Concern Over Previous Year

• Settlement risk dropped from 64 percent to 52 percent as a concern for banks
• Latency, with only 16 percent of banks regarding it as a concern, down from 19 percent in 2007 – a continuing trend.
• Macro-economic problems concerned only 14 percent of respondents, fell from 30 percent
• Major e-systems failure dropped as a concern to 13 percent of respondents from 26 percent
• Back office/settlement limitations retreated as a worry to 12 percent of respondents from 26 percent

Top Priorities

• Efficient execution, especially in volatile conditions, was the top priority for traders
• Better market access, a top priority for banks at 59 percent (up from 52 percent in 2007), including liquidity management, aggregation and order routing for greater choice and control. Managing volatility was still a concern at 55 percent, but down from 60 percent in 2007
• Bid-offer spreads are the greatest cost concern for investors in analyzing transaction costs, (highly active 76 percent, real money 50 percent), remaining at 50 percent for real money investors and falling from 81 percent for highly active.
• Growing pressure on bilateral credit lines is revealed in slowing demand for prime brokerage services, increasing from 36 percent in 2007 to 38 percent in 2008, after a jump from 23 percent to 36 percent the previous year.

Trends

• Buy-side respondents displayed a greater need for cross-product risk management opportunities. Money markets were again most likely to be traded alongside FX, but trading of other asset classes grew alongside FX.
• A move away from dedicated FX funds and towards hedging/overlay risk management strategies due to difficulty in realizing absolute returns through FX investment strategies continued last year.
• Increased electronic trading, with banks now conducting 85 percent of their trades electronically, up from 76 percent in 2007. Real Money investors trading electronically remained stable at 72 percent and Highly Active investors at 70 percent.

 
"This year’s study provides a telling snapshot of attitudes within the FX market as credit markets around the world continued to compress in late 2008. Market participants’ growing concerns about liquidity and counterparty credit have driven demand for electronic trading, better market access, and proven counterparty clearing solutions," said Derek Sammann, Managing Director, Global Head of CME Group FX Products.

More information about ClientKnowledge is available at www.clientknowledge.com.