The foreign exchange (FX) market is the world’s largest and most liquid financial market, shaping capital flows, trade, and financial stability. Below is a research-backed snapshot of where FX stands today: its size, structure, and key players, followed by the structural shifts likely to define its next chapter.
The market today: size, instruments, and who trades what
Average daily turnover in the over-the-counter (OTC) FX market reached $7.5 trillion in April 2022, according to the BIS Triennial Survey. Growth since 2019 was modest by historical standards at just 14%. Composition continues to tilt away from spot toward derivatives: FX swaps dominated with $3.8 trillion daily (51% of turnover), while spot accounted for $2.1 trillion (28%). Outright forwards made up 15%, with options and currency swaps together around 6%. (Source: BIS Triennial 2022).
Real-time plumbing data corroborates the market’s heft. CLS—the industry’s largest PvP settlement utility and the single biggest source of executed FX data—handles more than $2 trillion in daily submitted trades. For example, CLS reported $2.32 trillion in average daily submitted FX trades in July 2025. While this is not the entire FX market, CLS activity is a reliable proxy for institutional trading flows. (Source: CLS monthly activity).
Currency hierarchy: still dollar-centric, but edges move slowly
On the trading side, the U.S. dollar remains the linchpin, on one side of ~88% of all FX transactions. The euro participates in ~31%, yen ~17%, and sterling ~13%. The renminbi (RMB) rose to ~7%, now 5th most traded by turnover. (Source: BIS Triennial 2022 summary).
When it comes to official reserves, the dollar’s share has drifted down over two decades but remains dominant. IMF COFER data show that in early 2025, the dollar accounted for 57.7% of disclosed reserves, the euro 20.1%, the yen 5.8%, sterling 4.7%, and the renminbi 2.1%. (Source: IMF COFER note, Jul 2025 ; Reuters summary of Q4 2024).
For cross-border payments, SWIFT’s RMB Tracker shows that in June 2025 the RMB accounted for 2.88% of global payment value, ranking 6th worldwide. Even as RMB use has grown, the small share underscores that headlines about “de-dollarization” continue to outpace the data. (Source: SWIFT RMB Tracker, July/Aug 2025).
Geography: London still #1, but Asia is gaining
FX trading remains concentrated in a handful of hubs. In April 2022, five locations: the UK (38%), the US (19%), Singapore (9%), Hong Kong SAR (7%), and Japan (4%), accounted for 78% of global turnover. London retained its position as the world’s largest FX center, though its share slipped from 43% in 2019, while Singapore gained ground as Asia’s leading hub. (Source: BIS Triennial 2022-Geography).
Microstructure: electronification, algos, and single-dealer platforms
Electronification keeps rising across spot and derivatives: the e-FX ratio is ~60% globally (2022) and >60% in spot, where algorithmic execution is now standard. Banks’ single-dealer platforms (SDPs) and multi-dealer venues (MDPs) anchor this shift, even as their growth fragments liquidity and reduces the share of primary inter-dealer venues to <10% in all-currency terms (vs. 2019).
(Source: Bank of Japan review)
A notable structural change is the dominance of short-dated FX swaps used for funding and hedging, which have grown faster than spot in the past decade. (Source: Liberty Street Economics)
Macro forces to watch: rates, fragmentation, and liquidity plumbing
Three macro undercurrents will steer FX over the next cycle:
- Interest rate differentials and hedging demand. Elevated (but peaking) policy rates mean carry-trade incentives and FX-swap funding will continue to drive volumes. The BIS and central-bank research show how banks use FX swaps to manage dollar funding, particularly around quarter-ends when balance-sheet constraints bite. (Soucre: ECB research talk, 2024).
- Geopolitics and economic fragmentation. The BIS Annual Economic Report 2025 warns that rising trade tensions and protectionism risk reshaping the global financial system, fraying trust in institutions and exacerbating vulnerabilities. These shifts could have significant implications for FX markets as reserve strategies, trade flows, and financial linkages adjust. (Soucre: Reuters summary, Jun 2025).
- Market structure and best execution. The rise of electronification and algorithmic execution is no longer confined to spot; it is steadily expanding into forwards and swaps. Execution algos and best-execution tools are increasingly common in dealer-to-customer markets, with SDPs and ECNs competing by adding more features, services, and venues, contributing to an evolving “arms race” in market structure. (Source: BoJ Review 2025).
The near-future scenarios: what could change?
1) Payments and settlement are becoming faster, safer, and more programmable.
With Project mBridge now at minimum viable product stage, multi-CBDC platforms could materially compress cross-border settlement windows, particularly in emerging market corridors that struggle with correspondent banking access. Built on the mBridge Ledger, the platform already enables real-time peer-to-peer cross-border payments and FX transactions, pointing to a future of more immediate, cheaper, and universally accessible settlement. (Soucre: BIS mBridge MVP)
2) Dollar dominance remains, but the periphery deepens.
Reserve shares shift slowly; payment shares ebb and flow with policy and rates. The RMB has made gains in turnover and trade invoicing but remains single-digit in payments and reserves. A multipolar periphery: euro, sterling, yen, CAD, AUD and some EMs, likely grows at the margin, but data still point to a dollar-anchored core. (Soucre: IMF COFER).
3) Regulation and codes of conduct evolve from principles to proofs.
With the FX Global Code (Dec 2024) revision, buy-side and liquidity platforms are nudged toward greater disclosures and ex-post transparency. Over time, expect attestations to be reinforced by data-backed best-execution and real-time disclosure mechanisms, aligning with regulators’ leverage and conduct rules. (Soucre: GFXC update ; ESMA CFDs measures).
4) Expect wholesale FX settlement to tilt decisively toward a “risk-waterfall” regime
PvP where possible, netting to reduce exposures, and gross settlement minimized. Regulators and utilities will extend operating hours, improve interoperability via ISO 20022, and publish more frequent risk metrics, while EMDE corridors gain better PvP access. Same-day flows will expand with T+1 cycles, supported by liquidity optimization and extra settlement windows, and early tokenized or CBDC platforms will pilot PvP-style crossings. By the mid-2020s, most trades will net and settle faster, cutting trillions still exposed to settlement risk and strengthening global FX resilience. (Source: BIS CPMI on settlement risk).
Practical takeaways for market participants
- Treasurers and asset managers should expect tight pricing in major pairs but higher hedging costs and balance-sheet pressure around reporting dates. Using TCA and algo wheels will be key to ensuring best execution in today’s fragmented e-FX market. (Source: Liberty Street Economics)
- Banks & liquidity providers:Differentiate via SDP UX, smart routing, and client analytics. Stay aligned with the revised FX Global Code and enhance disclosure cover sheets. (Source: GFXC-Dec 2024 update).
- Policy makers & FMIs: Prioritize PvP expansion (including for non-CLS currencies) and interoperability pilots (e.g., mBridge/Mariana) to curtail settlement risk and enable safer cross-border flows. (Source: BIS CPMI 2025).
Conclusion
Today’s FX market remains dollar-centric, London-anchored, and derivatives-heavy, with electronification deepening and risk governance tightening. The future is likely to feature faster, safer cross-border settlement, wider PvP coverage, and incremental multipolarity in reserves and payments, not a wholesale regime change. Participants that invest in data-driven execution, robust settlement, and interoperable infrastructures will be best placed to thrive as the world’s most important market evolves.
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