October 24, 2006 | posted by Michael Baxter in Uncategorized |

London is scoring again, says International Financial Services London (IFSL) in a report published yesterday on foreign exchange. In the year just gone, London accounted for no less than 32.4 percent of the global foreign exchange market. It trounced the US, with its mere 18.2 percent share, while Japan was left even further behind with a market share of just 7.6 percent. More to the point, the balance has been shifting steadily in the UK’s favour. Since 2001, London’s market share has improved from 31.1 percent, while the US and Japan saw their respective shares shrink from 17.7 percent and 9.1 percent.

Foreign exchange as a means of investment is becoming more popular too. Average transactions totaled $2.7 trillion in April, making it “ten times the size of the combined daily turnover on all the world’s equity markets” says IFSL, citing research from Towergroup

Why? Apparently foreign exchange is becoming more important as an asset class, particularly within hedge funds and pension funds, while the Internet has opened up foreign exchange as a means of investment for Joe Public, with retail trades becoming more popular.

But why is London so popular. Apparently, a part of its attraction lies in its geographical position, between Europe and the US. And then there’s its language. English is the language of foreign exchange. But there’s more. Not only can the local population provide an abundant supply of English speakers, it also provides an indigenous population fluent in the language of finance.

IFSL said London also offered a large fund management industry, while investment banks often have prime brokers based locally. In addition, there’s easy access to markets. After all, London has more foreign banks than any other centre.

And despite the hysteria you sometimes read in the tabloids, IFSL says London has a tradition of welcoming foreign firms.

London has its bricks and mortar too, with substantial physical assets, particularly office accommodation. And finally, there is the perception that the UK has a proportionate approach in its regulatory climate.

For further information

Foreign ExchangeIFSL