May was a
challenging month for institutional foreign exchange (FX) markets. After a
period of relative stability, trading volumes across major platforms, including
Cboe, FXSpotStream, TFX, Euronext, and Fastmatch’s 360T, experienced a steep
decline compared to the April highs.
This
downturn surprised many market participants, especially given the unchanged
number of trading days compared to previous months. What caused such a dramatic
drop in institutional FX volumes? Let’s break down the numbers and examine the
factors behind this shift.
Several
factors contributed to the sharp decline in FX trading activity in May 2025.
Market volatility remained subdued, with fewer macroeconomic catalysts to spur
trading.
Uncertainty
over central bank policies, particularly from the Federal Reserve and Bank of
Japan, led to a “wait-and-see” approach among institutional players.
Additionally, the absence of major geopolitical events or economic data
releases kept traders on the sidelines, resulting in lower turnover across the
board.
In April,
markets were shaken by Donald Trump’s unexpected trade war rhetoric and threats
to impose tariffs on a wide range of countries. The U.S. dollar fell nearly
4.4% against a trade-weighted basket of currencies, its steepest monthly
decline in three years, fueling volatility and a surge in trading activity.
By
contrast, in May, the dollar’s drop was limited to just 0.2%, which led to a
notable pullback in institutional FX volumes, as illustrated by the examples
below.
US Market Activity Hit
Multi-Month Lows
The
US-based Cboe exchange saw a notable decrease in both total FX volumes and
average daily value (ADV) during May. Despite having the same number of trading
days as April, Cboe’s total turnover settled at $1.06 trillion, marking the
lowest level since February.
Daily
trading volumes also slipped, reaching just under $48 billion, a three-month
low. While these figures may seem discouraging, it’s important to note that
year-on-year comparisons remain positive.
In May
2024, Cboe’s total FX volume was $971 billion, with an ADV of $42 billion,
indicating that the market has grown over the past year, even if the recent
monthly trend has been negative.
Steepest Decline in Japan
The Tokyo
Financial Exchange (TFX) experienced an even more dramatic contraction on its
Click 365 FX platform. In May, monthly trading volumes plunged by nearly 37% to
1.43 million contracts, with the average daily volume falling to 65,000
contracts. Compared to the same period last year, this represents a staggering
41% decrease.
The USD/JPY
currency pair, which remains the core driver of activity on the platform, saw a
pronounced drop in trading. Volume for this pair alone fell 32%
month-over-month and 20% year-over-year.
Across all
major traded markets on TFX, there was no month-on-month growth, highlighting
the widespread nature of the slowdown.
FXSpotStream: First
Sub-$100 Billion ADV in Months
FXSpotStream
also reported a significant dip in activity. For the first time since December
2024, its average daily volume (ADV) fell below $100 billion. The total ADV
contracted from $122 billion in April to just under $99 billion in May.
While other
ADV components remained steady at $31 billion, spot ADV saw a more pronounced
decline, shrinking from $91.4 billion to $68 billion. This drop underscores the
broad-based nature of the slowdown affecting both spot and other FX products.
Source: FXSpotStream
Significant Contraction in
Europe
Euronext was
not immune to the broader market malaise, with its FX trading volumes
experiencing a substantial contraction. In May, total volumes fell to $719.8
billion, down from $893.1 billion reported in April.
The average
daily volume also decreased, moving from $37.2 billion to $32.7 billion. This
decline reflects a general reluctance among institutional players to engage in
the market amid low volatility and limited trading catalysts.
Moreover, Fastmatch’s
360T platform posted the weakest results among major FX venues in May. Total
turnover plummeted to $605.1 billion, a sharp fall from the nearly $871 billion
reported the previous month.
The average
daily volume also suffered, dropping from almost $40 billion in April to just
$27.5 billion in May.
With
volatility at a low ebb and few significant economic or geopolitical events to
spur trading, institutions largely chose to remain on the sidelines.
May was a
challenging month for institutional foreign exchange (FX) markets. After a
period of relative stability, trading volumes across major platforms, including
Cboe, FXSpotStream, TFX, Euronext, and Fastmatch’s 360T, experienced a steep
decline compared to the April highs.
This
downturn surprised many market participants, especially given the unchanged
number of trading days compared to previous months. What caused such a dramatic
drop in institutional FX volumes? Let’s break down the numbers and examine the
factors behind this shift.
Several
factors contributed to the sharp decline in FX trading activity in May 2025.
Market volatility remained subdued, with fewer macroeconomic catalysts to spur
trading.
Uncertainty
over central bank policies, particularly from the Federal Reserve and Bank of
Japan, led to a “wait-and-see” approach among institutional players.
Additionally, the absence of major geopolitical events or economic data
releases kept traders on the sidelines, resulting in lower turnover across the
board.
In April,
markets were shaken by Donald Trump’s unexpected trade war rhetoric and threats
to impose tariffs on a wide range of countries. The U.S. dollar fell nearly
4.4% against a trade-weighted basket of currencies, its steepest monthly
decline in three years, fueling volatility and a surge in trading activity.
By
contrast, in May, the dollar’s drop was limited to just 0.2%, which led to a
notable pullback in institutional FX volumes, as illustrated by the examples
below.
US Market Activity Hit
Multi-Month Lows
The
US-based Cboe exchange saw a notable decrease in both total FX volumes and
average daily value (ADV) during May. Despite having the same number of trading
days as April, Cboe’s total turnover settled at $1.06 trillion, marking the
lowest level since February.
Daily
trading volumes also slipped, reaching just under $48 billion, a three-month
low. While these figures may seem discouraging, it’s important to note that
year-on-year comparisons remain positive.
In May
2024, Cboe’s total FX volume was $971 billion, with an ADV of $42 billion,
indicating that the market has grown over the past year, even if the recent
monthly trend has been negative.
Steepest Decline in Japan
The Tokyo
Financial Exchange (TFX) experienced an even more dramatic contraction on its
Click 365 FX platform. In May, monthly trading volumes plunged by nearly 37% to
1.43 million contracts, with the average daily volume falling to 65,000
contracts. Compared to the same period last year, this represents a staggering
41% decrease.
The USD/JPY
currency pair, which remains the core driver of activity on the platform, saw a
pronounced drop in trading. Volume for this pair alone fell 32%
month-over-month and 20% year-over-year.
Across all
major traded markets on TFX, there was no month-on-month growth, highlighting
the widespread nature of the slowdown.
FXSpotStream: First
Sub-$100 Billion ADV in Months
FXSpotStream
also reported a significant dip in activity. For the first time since December
2024, its average daily volume (ADV) fell below $100 billion. The total ADV
contracted from $122 billion in April to just under $99 billion in May.
While other
ADV components remained steady at $31 billion, spot ADV saw a more pronounced
decline, shrinking from $91.4 billion to $68 billion. This drop underscores the
broad-based nature of the slowdown affecting both spot and other FX products.
Source: FXSpotStream
Significant Contraction in
Europe
Euronext was
not immune to the broader market malaise, with its FX trading volumes
experiencing a substantial contraction. In May, total volumes fell to $719.8
billion, down from $893.1 billion reported in April.
The average
daily volume also decreased, moving from $37.2 billion to $32.7 billion. This
decline reflects a general reluctance among institutional players to engage in
the market amid low volatility and limited trading catalysts.
Moreover, Fastmatch’s
360T platform posted the weakest results among major FX venues in May. Total
turnover plummeted to $605.1 billion, a sharp fall from the nearly $871 billion
reported the previous month.
The average
daily volume also suffered, dropping from almost $40 billion in April to just
$27.5 billion in May.
With
volatility at a low ebb and few significant economic or geopolitical events to
spur trading, institutions largely chose to remain on the sidelines.
