Is the growth in Spot FX expected to continue?

According to the recently published report by Aite Group ‘Global FX Market Update 2013: Increased Market Transparency, More Competition’, June 2013, the spot FX volumes will continue to grow on the back of prime-brokered clients (retail FX brokers and hedge funds/HFT firms) for the foreseeable future. Other FX products not impacted directly by regulations, such as outright forwards and FX swaps, should experience similar growth trajectory. Aite Group expects the spot FX market to reach US$2.2 trillion in daily turnover by 2016, up 35% from 2010 levels.

The largest daily trading volume in foreign exchange has traditionally come from the FX swap part of the market, but there are clear signs that new regulations on both sides of the Atlantic— particularly related to higher margin requirements for OTC FX swaps—will temper volume growth as market participants unable to secure margin to maintain or roll FX swaps choose to let them expire or look for alternative hedges on the futures/on-exchange side of the market, something that is now being termed “the futurization of FX swaps.”