Circular Letter C2.10-0086 — Global Foreign Exchange and Derivatives Market Survey - Spring 2010

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4920 E-mail: reporting.banques@bcl.lu Ref.: C2.10-0086 Luxembourg, January 29, 2010 Circular Letter To all credit institutions Subject: Global Foreign Exchange and Derivatives Market Survey - Spring 2010

Ladies and Gentlemen,

The eighth coordinated international survey of the global foreign exchange and derivatives market took place in April 2007. A ninth survey is scheduled for spring 2010. Following the last survey, Luxembourg is once again participating in this international survey. Consequently, we request that you communicate your institution's activity in the foreign exchange and derivatives market during April 2010, respecting the methodological framework defined by the Bank for International Settlements (BIS). In the spirit of consistency of the collected data, the methodology is largely identical to that applied during the previous survey.

The main objective of the survey is to obtain reasonably comprehensive and internationally comparable information on the size and structure of the foreign exchange and derivatives markets as well as on activities in these markets. The purpose of these statistics is to improve market transparency, which will help central banks and other authorities as well as market participants to better understand aspects of the activity of the global financial system.

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4920 E-mail: reporting.banques@bcl.lu

The data collected by the BCL will be transmitted in aggregated form to the BIS, which will ensure 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 published and made available to the public on the respective websites of the BIS and the BCL.

In order to aggregate the various national data and to carry out an analysis on comparable figures, it was necessary to agree in advance on a common methodology. The latter is explained in detail on the BIS website at the following address:
http://www.bis.org/statistics/triennialrep/triennial_turnover_rd.htm

The documentation available for the "Turnover" component includes the following:

• the necessary instructions for data compilation, "Reporting guidelines"
• a series of general questions that could prove useful for data compilation, "Frequently asked questions"
• EXCEL files for data entry; in this context, the BCL recommends the use of files containing macros that allow for the verification of consistency of the entered information
• two lists of institutions participating in the survey, namely a list of institutions participating in the BIS survey and a list of institutions conducting foreign exchange and derivatives transactions

Thus, credit institutions must download the necessary instructions for data compilation as well as the tables to be filled in at the aforementioned address on the BIS website.

It is important to mention that the BCL only participates in the survey of foreign exchange and derivative transactions carried out during the month of April 2010, i.e., the "Turnover part". The documentation referring to the "Amounts outstanding part" is therefore not to be considered, since the BCL does not participate in this component of the BIS survey.

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4920 E-mail: reporting.banques@bcl.lu

In this context, we wish to draw your attention to the major points of the instructions.

1 The survey aims to collect data on foreign exchange and derivative transactions according to the following market classification:
1.1 transactions related to exchange rates "foreign exchange contracts"
1.2 derivatives related to interest rates "single-currency interest rate derivatives"

2 Data "turnover"
The survey aims to assess the total value of all foreign exchange-related transactions as well as all transactions on interest rate derivatives carried out during the month of April 2010. Each transaction is to be reported only once, taking into account only one element of each transaction. For example, a transaction involving USD and AUD is to be indicated only once by the USD-AUD pair, for example, and not a second time by the AUD-USD pair.

Data is to be reported on a gross basis including all foreign exchange purchase and sale transactions without offsetting purchases against sales. For example, a purchase of USD against AUD, followed by a sale of USD against AUD, are not to be offset, but the total of the purchase and sale is to be indicated. "Netting" arrangements and "offsets" are not taken into consideration.

The transactions to be taken into account are those concluded during the month of April 2010, whether these transactions are settled during this period or during another period does not matter.

3 For Luxembourg credit institutions, transactions involving the euro (EUR) are to be entered in the tabs titled "A1" and "A5" which record transactions carried out in the domestic currency. Thus, in the tabs titled "A3" and "A7" the columns reserved for the survey of EUR operations must be blank.

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

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4920 E-mail: reporting.banques@bcl.lu

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

6 To the extent that a significant part of foreign exchange and derivative transactions is concluded with other market professionals who also report these transactions, 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 transactions and derivative transactions are therefore to be grouped according to whether they are concluded either with professionals who are also required to report these transactions, 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 transactions and their derivative transactions. Regarding institutions in other financial centers, the BIS has prepared a typology of institutions that will report their foreign exchange and derivative transactions to their respective central bank; this typology is included on the aforementioned website.

7 We therefore ask you to download the EXCEL files from the indicated site to enter the data; the data thus entered are to be saved and returned to the BCL on CD-ROM.

The unit of account for the provision of 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 various cells, even if they exceed three digits, must not be separated either 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.

In this context, we ask you to mention the name of the reporting institution as well as that of the responsible person with their phone number when sending the data.

Finally, we ask you to return the duly completed files to us by May 14, 2010 at the latest and/or, if applicable, to inform us by mail if your institution has no transactions to report.

In case you have technical problems with the processing of the data, we invite you to contact the BCL by sending an electronic message to reporting.banques@bcl.lu for further details.

Please accept, Ladies and Gentlemen, the assurance of our very distinguished sentiments.

Roland NOCKELS Serge KOLB
Advisor to the Directorate Director