BCL Circular 2001/164 of 28 March 2001 — Survey of the Global Foreign Exchange and Derivatives Market - Spring 2001

Luxembourg, 28 March 2001
To all credit institutions
BCL Circular 2001/164
Survey of the Global Foreign Exchange and Derivatives Market - Spring 2001

Dear Sirs, Madams,

In April 1998, the fifth coordinated international survey of the global foreign exchange and derivatives market took place. A sixth survey is scheduled for spring 2001. Following the precedent of the last survey, Luxembourg is once again participating in this international survey. Consequently, we request that you communicate the activity of your institution in the foreign exchange and derivatives markets during the month of April 2001, respecting the methodological framework outlined below.

The main objective of the survey is to assess the size, structure, and evolution of the global foreign exchange and derivatives markets. The data collected will allow for conclusions to be drawn regarding the overall volume of activity in these markets, the relative importance of different financial centers, currencies traded, and instruments used. These same data will serve for the analysis of the role played by derivatives markets in price risk transfer. Credit risk analysis is not covered by the survey.

The data collected by the BCL will be transmitted in aggregated form to the Bank for International Settlements (BIS), which will provide the secretariat for the establishment of data at the international level as well as their analysis. It is expected that the results of this statistical compilation and analysis work will be the subject of a publication that the BCL will provide to credit institutions participating in the survey.

In order to aggregate the various national data and to conduct an analysis on comparable figures, it was necessary to agree in advance on a common methodology. This is detailed in the documents attached. However, we would like to draw your attention to some key points of the approach adopted.

1. The survey aims to collect data on foreign exchange operations and derivatives according to the following market classification:
   a) operations related to exchange rates (tables A1 to A8 and E1 to E3) “foreign exchange contracts”; b) derivatives related to interest rates (tables B1 to B2 and E4) “single-currency interest rate derivatives”.

2. “Turnover” data.
   The survey aims to assess the total value of all operations related to exchange rates as well as all operations on derivatives related to interest rates carried out during the month of April 2001 (tables A1 to A6, B1 to B2 and E1 to E4). Each transaction is to be reported only once, taking into account only one element of each transaction. For example, a transaction involving USD and DEM is to be indicated only once by the pair USD-DEM, for example, and not a second time by the pair DEM-USD. The data are to be reported on a gross basis including all operations for the purchase and sale of currencies without offsetting purchases against sales. For example, a purchase of USD against DEM, followed by a sale of USD against DEM, are not to be offset, but the total of the purchase and the sale is to be indicated. “Netting” arrangements and “offsets” are not taken into consideration. The operations to be taken into account are those concluded during the month of April 2001, whether these operations are settled during this period or during another period does not matter.

3. The institutional base of the survey is limited to Luxembourg territory. It is therefore necessary not to take into account operations concluded by branches or subsidiaries abroad of Luxembourg banks. On the other hand, branches and subsidiaries of foreign credit institutions established in Luxembourg are obliged to provide the required responses.

4. The survey aims not only to know the total value of all operations in the foreign exchange and derivatives markets, but also to know the structure of these markets. This structure will be established from two axes of analysis. The first contrasts the different currencies, while the second allocates operations according to their nature, maturity, and counterparty.

5. To the extent that a significant part of foreign exchange operations and derivatives operations is concluded with other market professionals who also report these operations, a phenomenon of double counting appears. This double counting unduly inflates the overall size of the market and distorts the image that can be formed of the market structure; it is therefore necessary to eliminate it. To this end, it is important to identify at the outset the counterparty with which an operation is concluded. Foreign exchange operations and derivatives operations are therefore to be grouped according to whether they are concluded either with professionals who are also required to report these operations, or with other financial institutions or non-financial clients. To make this distinction, it must be known that all credit institutions in Luxembourg are required to report their foreign exchange operations and their derivatives operations. Regarding institutions in other financial centers, the BIS has prepared a typology of institutions that will report their foreign exchange operations and derivatives operations to their respective central banks; this typology is included on the floppy disk we provide in the annex.

6. The tables to be filled out are provided on a 3.5” (DOS formatted) 2HD 1.44 MB floppy disk. This floppy disk is to be returned to the BCL duly completed. We kindly ask you to insert the amounts to be reported into the respective cells.
   The unit of account for providing the requested information is USD. Transactions are to be reported in millions of USD without comma or decimal. The figures, which are to be entered in the different cells, even if they exceed three digits, must not be separated by a numeric delimiter (point, comma, etc.) nor by a space. For an amount of 1 billion and 289 million USD, for example, it is therefore necessary to write 1289. The data are to be saved in the file even on the provided floppy disk. Credit institutions will ensure not to forget to enter the name of the bank, its BCL identification number, the name of the person responsible at the reporting credit institution as well as their telephone number. The name of the bank as well as its identification number must be entered a second time on the outer label of the floppy disk. Furthermore, the name of the employee and an authorized signature are to be included on this outer label.

7. In the event that credit institutions encounter technical problems with data processing, they may contact the BCL by telephone at 47 74 43 18 (Mr. Scholer) for further details.

8. Credit institutions invited to participate in this survey will find on the attached floppy disk:

   • Excel tables to be filled out by credit institutions
   • The list of reporting credit institutions sorted by name and country
   • A detailed methodological note in English;
   • A document containing methodological questions with the corresponding answers.

9. The completed floppy disk is to be returned by the end of May 2001.

Please accept, Sirs, Madams, the assurance of our very distinguished sentiments.

BANQUE CENTRALE DU LUXEMBOURG
The Management

Serge KOLB Andrée BILLON Yves MERSCH

Annexes: 4