The 54 central banks and monetary authorities that took a measure of the foreign exchange market last year under the auspices of the Bank for International Settlements discovered an unprecedented rise in activity. Average daily turnover totaled $3.2 trillion, an increase of 71% at current exchange rates from the previous global survey done three years earlier.
A significant increase in the foreign exchange activity of hedge funds was one reason for the surge, as the search for alpha, or excess returns, led them to the FX market. Trading foreign currencies as an asset class became popular in part because the market moves up and down independently of smaller markets, such as stocks and bonds.
Of course, the search for higher returns in overseas stock markets by investors of all descriptions also contributed to the rise in FX trading and hedging of positions. A third major factor in the rise of turnover in traditional foreign exchange markets was an increase in the level of algorithmic trading by high-speed computers.
Trading between large banks, either for themselves or their customers, accounts for more than half of the trading in the FX market. The best foreign exchange banks are those institutions that provide fast, reliable and cost-effective services to global businesses and investors, as well as advice and innovative products to meet the specific needs of their increasingly diverse range of customers.
Global Finance selected Deutsche Bank as the global winner. We also chose the leading foreign exchange banks in 82 countries and regions, as well as the best online trading systems, both bank-owned and independent, and the best bank for foreign exchange research, as well as separate awards for fundamental research, technical research, currency forecasts and strategy and hedging.
With input from industry analysts, corporate executives and technology experts, Global Finance selected the winners based on objective and subjective factors. Our criteria included transaction volume, market share, global coverage, customer service, competitive pricing and innovative products and technology.