Results for the Actual Conditions Survey ofOver-The-Counter Retail Foreign Exchange Margin Trading
Aug. 29th, 2014
The Financial Futures Association of JapanThe Financial Futures Association of Japan ("Association"), together with the Tokyo Foreign
Exchange Market Committee, conducts an annual survey of the actual conditions, including
business models, of members that handle over-the-counter retail foreign exchange (FX)
margin trading.
Part One: About the 2014 Survey
1. Survey Method
Questionnaires were distributed to members that handled over-the-counter retail FX
margin trading as of April 30, 2014. These questionnaires were then collected andtabulated.
2.

Questionnaire Collection Status
Members coveredby the survey
60

3.

Responses
in 2014 survey
60

Responses
in 2013 survey
59

New responses
in 2014 survey
3

Tabulation Results[Item 1]
(1) Business Models
The Association categorizes the business models of members that conduct
over-the-counter retail FX margin trading into six groups 1 based on their characteristics,
such as the mechanism of the transactions.
Pattern

Execution
decision

Marry

Order of covertransactions

Execution ofcovertransactions

Model 1Yes
Covertransactions
carried out
after contract
with customer

Model 2
Internal
Model 3
No

Carry out
promptly after
contract withcustomer

No

Contract with customer after
cover transaction is carried out
based on customer's order

Model 4Model 5External(outsourcing
contractor)

Discretionary

Model 6

1

Transaction price formation method
Multiple firms are used for covertransactions, and prices are formulated
based on the best rate or the rate of one
specific firm
One firm is selected for cover transactions,and prices are formulated based on the
cover rate for that firm
Multiple firms are used for covertransactions, and prices are formulated
based on the best rate or the rate of one
specific firm
One firm is selected for cover transactions,and prices are formulated based on the
cover rate for that firm
Multiple firms are used for covertransactions, and prices are formulated
based on the best rate or the rate of one
specific firm
One firm is selected for cover transactions,and prices are formulated based on the
cover rate for that firm

Models 1–4 use an execution decision mechanism known as IE (internal execution), while Models 5 & 6 use amechanism known as EE (external execution).

1(2) Distribution of Business Models
Adopted model2014 survey
2013 survey*

Model 124
24

Model 23
1Model 34
4Model 46
6

Model 510
10Model 628
26

The total number of business models exceeds the number of members that responded to the survey because multiple
responses were given by members that offer multiple transaction plans.

For the 57 members for which comparisons with the previous survey are possible,
business models have changed as shown in the table below.
Model number
2014 survey
2013 survey
Net Change

1
24
23
1

2
3
1
2

3
4
4
0

4
6
5
1

5
10
10
0

6
25
25
0

Details of change
Model number
Increase
Decrease

1
2
1

2
2
0

3
2
2

4
2
1

5
4
4

6
3
3

Total
15
11

Although there were no major changes in the distribution of business models as a whole(total for each business model) compared to the previous survey, the details of changeshows that some members changed their business models or added new business models.
The following table shows the business models of the three members that gave responses
as new members handling over-the-counter retail FX margin trading in the 2014 survey.
Model number
Number of new members

1
0

2
0

3
0

4
0

5
0

6
3

The following table shows the business models of the two members that responded to the2013 survey and then withdrew from the over-the-counter retail FX margin tradingbusiness (including discontinuance of business) before the 2014 survey.
Model number
Number of withdrawing members

1
1

2
0

3
0

4
1

5
0

6
1

(3) Ranking of Members Based on Trading Volume and Their Business Models
The Association, with the cooperation of supporting members, tabulates the monthly
trading volume of over-the-counter retail FX margin trading that members conduct with
their customers, and publicizes the results as Monthly Statistical Bulletin on
Over-The-Counter Retail FX Margin Trading.
Of members that responded to both the 2013 and 2014 surveys, 48 members cooperated
with the monthly bulletins. These 48 members were divided into tertile groups based on
trading volume for April 2, and the following table shows their business models by group.

2

In both the 2013 and 2014 surveys, the top tertile are companies ranked 1st to 16th, the middle tertile are those ranked
17th to 32nd, and the bottom tertile are those ranked 33rd to 48th, based on monthly trading volume in April.

22014 Survey
Model number
Top tertile
Middle tertile
Bottom tertile

1
11
6
5

2
1
2
0

3
3
0
1

4
3
2
0

5
6
1
1

6
1
7
10

1
10
8
4

2
1
0
0

3
3
1
0

4
3
2
0

5
4
1
4

6
3
5
9

2013 Survey
Model number
Top tertile
Middle tertile
Bottom tertile*Movement Between Groups
Possible movements Number ofbetween groups
companies
1
Middle→Top
Bottom→Middle

2

Top→Middle

1Middle→Bottom

2*Reference
Adopted models(48 companies)
Top tertile
Middle tertile
Bottom tertile

Adopted models(48 companies)
Top tertile
Middle tertile
Bottom tertile

Model
1

Model
2

Model
3

1

Model
4

Model
5
1

Model
6
1

1

1

2

1

Models 1–4 (IE, DI)
2014 Survey
2013 Survey
18
17
10
11
6
4

Models 5–6 (EE, STP, NDD)
2014 Survey
2013 Survey
7
7
8
6
11
13

Models 2, 4, 6
(one firm for cover transactions)2014 Survey
2013 Survey
5
7
11
7
10
9

Models 1, 3, 5
(multiple firms for cover transactions)2014 Survey
2013 Survey
20
17
7
10
7
8

Among members constituting the top tertile, there was an increase in those adopting
business models in which multiple firms are used for cover transactions. Meanwhile,
among members in the middle and bottom tertiles, there was an increase in thoseadopting business models in which one firm is used for cover transactions.
(4) Firms Used for Cover Transactions in Models 2, 4, and 6
In the latest survey, we attempted to classify the firms used by members for covertransactions by checking the websites of the 35 members that adopt business models thatuse one company for cover transactions (Models 2, 4, and 6) to find out the names offirms used for cover transactions.

3Classification of firms used for cover transactions
Number ofmembers(2014 Survey;
Models 2, 4, 6)

Number of disclosed
firms used for covertransactions

Valid
responses[Note 1]

[Note 2]

Withinmember's
group

Outsidemember's
group

Domestic
company

Foreigncompany

35
29
36
16
20
12
24
Note 1: The number of members whose websites listed the firms used for cover transactions, and this information
enabled the classification of these firms. (Researched by the Association's Research Department on June 6,2014)
Note 2: The total number of firms used for cover transactions according to the valid responses. In cases in which
members offer multiple transaction plans to customers and each plan has separate firms used for covertransactions, the number of firms used for cover transactions for each plan were added.
Firms used
for covertransactions(actual)Domestic firms used forcover transactions
Full members

Total[Note 2]

[Note 1]Other than full
members

Foreign firms used forcover transactions
Total

Withinmember's group

Outsidemember's group

25
7
6
1
18
9
9
Note 1: The actual number of firms used for cover transactions after excluding overlap among disclosed firms used
for cover transactions.
Note 2: Cases in which an over-the-counter retail FX margin trading operator that belongs to the Association is used
for cover transactions by another member. Special participants are excluded.

[Item 2] Usage of the Prime Broker (PB) 3 System and Usage Amount
Survey month/year [Note 1]

Members using
the system

April 2014
April 201316
17

Number ofcontracted PBs(Total)30
30

Number of PBs(net) [Note 2]

PB usage amount(in million Yen)

7-

52,764,799-

Note 1: Compilation of number of PBs (net) and PB usage amount began in the 2014 survey.
Note 2: Of the PBs that members have contracts with, the number that excludes overlaps.

(1) Changes in the Usage of PBs by Members (2013→2014)
Stopped using PB
system2 companies

Decreased PBs
used
1 company

Increased PBs
used
3 companies

Started using PB
system
1 company(2) Characteristics of PBs
Japanese-affiliatedForeign business[Note 1]

1[Note 2]

6Note 1: Belongs to corporate group headquartered in Japan, including overseas subsidiaries, etc.
Note 2: Belongs to corporate group headquartered in a nation (region) other than Japan, including Japanesesubsidiaries, etc.

3

A Prime Broker (PB) is a firm that acts as an intermediary between a member and bank used for cover transactions that"gives up," or, under a tri-party agreement, "takes up" a member's position in transactions (settlement) between a member
and a financial institution used for cover transactions.

4[Item 3] Offering of Automatic Trading Tools
Surveymonth/year

Members offering
automatic trading
tools

April 2014
April 201321
19

Ownership of automatic trading tools offered
Others
Proprietary
Both combined(non-proprietary)
3
16
2
1
16
2

(1) Change in Offering of Automatic Trading Tools (2013→2014)
Withdrew frombusiness
1 company

Stopped offering
tools
3 companies

Began offering
tools
6 companies(2) Effect of Automatic Trading Tools
Of the 21 members that offered automatic trading tools as of the April 2014 survey, 15
members cooperate with our monthly over-the-counter bulletins. The following tableshows the over-the-counter retail FX margin trading volume (for the month of April) for
these 15 members.
(Unit: million Yen, %)Classification
All members cooperating withpreliminary monthly reports
15 members that offer tools

April 2014

Trading volume
April 2013

Increase/decrease

238,180,516

442,898,565–46.2

35,340,750

78,440,889–54.9[Item 4] Offering of API 4 to Customers
Survey month/year
April 2014
April 2013

Members offering API
7 companies
5 companies

Stopped offering
0 companies-

Started offering
2 companies-

 Effect of Offering API
Of the seven members that offer API as of the April 2014 survey, six members
cooperate with our monthly over-the-counter bulletins. The following table shows theover-the-counter retail FX margin trading volume (for the month of April) for these six
members.
(Unit: million Yen, %)Classification

4

Trading volume
April 2014

April 2013

Increase/decrease

All members cooperating withpreliminary monthly reports

238,180,516

442,898,565–46.2

6 members that offer API

24,641,685

51,257,345–51.9

In this document, API (Application Programming Interface) refers to specifications for interfaces used to exchange datawith outside software (mainly trading systems).

5[Item 5] Currency Options
The following table shows the status of members handling over-the-counter retail FX
margin trading that also handled OTC currency option transactions (limited totransactions subject to the Financial Instruments and Exchange Act) in April of this year
and in April of the previous year.
Members handling OTC currency option transactionsof which, BO (binary
options) for individuals
10 companies
7 companies
8 companies
6 companies

Classification
April 2014
April 2013

4.

Reference Information(1) Market Share Distribution for Over-The-Counter Retail FX Margin Trading(Unit: %)Tabulation
date

Reportingmembers

April 2014
April 2013
April 2012

51
50
56

1–3
54.46
47.24
44.45

Ranking of trading volume of reporting members
4–10
11–20
21–30
31–40
28.43
12.88
2.95
1.15
34.42
13.31
3.68
1.30
34.40
13.75
5.27
7.96

41–
0.13
0.05
0.15

Note: Trading volume for the month of April (in Japanese yen) as reported by members cooperating with our Monthly
Statistical Bulletin on Over-The-Counter Retail FX Margin Trading were listed in descending order, and thefigure for each group was tabulated and divided by the total trading volume for all reporting members.

(2) Past Trend for Trading Volume for Over-The-Counter Retail FX Margin Trading
Trading Volume and Open Positions Past Trend

Left-axis = Trading Volume
unit: million Yen

Right-axis = Position
unit: million Yen

Short Position
Long Position
Total Position
Trading Volume

Apr
-11

Jun
-11

Aug
-11

Oct
-11

Dec
-11

Feb
-12

Apr
-12

Jun
-12

Aug
-12

Oct
-12

Dec
-12

Feb
-13

Apr
-13

Jun
-13

Aug
-13

Oct
-13

Dec
-13

Feb
-14

Apr
-14

* For detailed data used in the table above, please visit http://www.ffaj.or.jp/performance/fx_flash.html

6Part Two:

Tabulation and Analysis of Data for Cover Transactions
for Over-The-Counter Retail FX Margin Trading

The Association collects from its members various data (monitoring data) 5 that are necessary
for conducting surveys of business management trends of members.
In the joint survey by the Association and the Tokyo Foreign Exchange Market Committee
conducted every year in April, out of the monitoring data for that month, mostly data related
to cover transactions carried out in line with over-the-counter retail FX margin trading bymembers handling over-the-counter retail FX margin trading were used to tabulate andanalyze the classification of firms used for cover transactions, etc. 6
1.

Cover Transactions Tabulated and Classification of Members(1) Business Category of Members That Handle Over-The-Counter Retail FX Margin
Trading
The following table shows the business categories of members that handle
over-the-counter retail FX margin trading.
Table 1: Past Trend of Members Handling Over-The-Counter Retail FX
Margin Trading by Business Category
Business Category of Member
Registered financial institution
Securities company [Note 1]
Financial futures company, etc. [Note 2]
Total

April 2014
5
31
25
61

April 2013
3
30
26
59

April 2012
3
34
27
64

Note 1: Securities companies are members of the Association that are also members of the Japan Securities Dealers
Association (excluding over-the-counter derivative transactions members and special members).
Note 2: Financial futures companies are members of the Association (including commodity traders) other thanregistered financial institutions and securities companies.

2.

Effect of FX Margin Trading In Japan on FX Market(1) Flow of Transactions
The flow of funds in over-the-counter retail FX margin trading comprises the flow
between the customer and over-the-counter trading operator (internal circulation) and theflow between the over-the-counter trading operator and firm used for cover transactions(external circulation). Marry transactions that are offset within the over-the-countertrading operator without carrying out cover transactions with an outside firm arecategorized as internal circulation.
Furthermore, a look at Tokyo Financial Exchange's Click365, which is used foron-exchange retail FX margin trading in Japan, reveals a framework in which such
5

6

The Association manages monitoring data mainly by requesting (copies of) various reports and materials regularly
submitted to financial authorities by members that are financial instruments business operators, etc., and then extracting
information necessary for the Association's self-regulatory activities.
For the "Status of Cover Transactions Related to Over-The-Counter Retail FX Margin Trading" in the 2013 survey, please
see the following URL: http://www.ffaj.or.jp/performance/data/cover_reports/cover_report_jp.pdf

7

trading is matched between investors and market makers, so it has the samecharacteristics as external circulation in over-the-counter retail FX margin trading.
The external circulation of this retail FX margin trading could have an effect on the FX
market through firms used for cover transactions (as well as market makers).
The following table shows the external circulation volume for retail FX margin trading.
Table 2: External Circulation Volume for Retail FX Margin Trading(Unit: hundred million Yen, %)Surveymonth/year

Over-the-counter retail FX margin trading(2) ExternalInternal(1)(2)/(1)circulation
circulation
Turnover(Total amount of cover(%)= (1)–(2)[Note 1]transactions)(3)
Click365
turnover[Notes 3, 4]External
circulation
volume =(2)+(3)2,447,350
4,421,193
1,278,975

23,35874,80649,157

1,009,427
2,100,566
749,445[Note 2]

April 2014
April 2013
April 2012

986,069
2,025,760
700,288

40.3%
45.8%
54.8%

1,461,281
2,395,433
578,687

Note 1: Based on monitoring data.
Note 2: Based on monitoring data. Hedge transactions and other transactions are included for members if there isdifficulty in differentiating with hedge transactions and other proprietary trading.
Note 3: This figure represents the monthly trading volume disclosed by the Tokyo Financial Exchange multiplied by
the month-end settlement price.
Note 4: There were six MM (marker makers) as of June 30, 2014 (Commerzbank, Deutsche Securities, Barclays Bank,
Goldman Sachs Japan, Nomura Securities, and Bank of Tokyo-Mitsubishi UFJ).

(2) Comparison with the Tokyo FX Market
Table 3: Comparison between Spot Transactions on the Tokyo FX Market andExternal Circulation Transaction Amounts(Unit: hundred million Yen, %)Surveymonth/year
April 2014

Survey results disclosed by Tokyo Foreign
Exchange Market Committee [Note 1](1) Spot(2) Of which, transactionstransaction
with non-financial
amountcustomers [Note 2] (domestic)
2,347,993
764,693(3) External
circulation ofretail FX
margin trading(3)/(1)(%)(3)/(2)(%)

1,009,427

42.99％

132.00％April 2013

3,077,047

793,050

2,100,566

68.27％

264.87％

April 2012

1,614,486

319,237

749,44546.42％

234.76％Note 1: The spot transaction volume listed on "[Annex] <Table 1>" in the Tokyo Foreign Exchange Market
Committee's "Results of Turnover Survey of Tokyo Foreign Exchange Market" was multiplied by the
USD/JPY exchange rate as of 5:00 p.m. on the last day of April of each year as disclosed by the Bank ofJapan (80.74 yen for April 2012, 97.83 yen for April 2013, and 102.51 yen for 2014).
Note 2: The definition of non-financial customers follows the definition given in the Tokyo Foreign Exchange Market
Committee's "Results of Turnover Survey of Tokyo Foreign Exchange Market." The explanation in thissurvey states that transactions with FX margin trading operators are counted as transactions with
non-financial customers.

3.

Cover Transactions for Over-The-Counter Retail FX Margin Transactions

As shown in Table 3, the external circulation for retail FX margin trading (total covertransaction amount) exceeds the transaction amount with non-financial customers on theTokyo FX market (domestic).
The details of cover transactions for over-the-counter retail FX margin trading are explained8below.
(1) Classification of Cover Transactions, 7 Number of Members Using Them, andNumber of Firms Used for Cover Transactions
Table 4 shows the classification of firms used for cover transactions by over-the-counter
retail FX margin trading operators. Financial institutions that report to the Tokyo Foreign
Exchange Market Committee on average have transactions with about 6.5 members
handling over-the-counter retail FX margin trading, so compared to other classifications(regions), there are many connections between financial institutions used for covertransactions and retail FX margin trading operators in the Tokyo FX market.
Table 4: Distribution of Firms Used for Cover Transactions for Domestic
Over-The-Counter Retail FX Margin Trading and Usage Status
Classification of firms used
for cover transactions

Number of firms used for covertransactions by classification

Total number of members handlingover-the-counter retail FX margin
trading that use firms for covertransactions [Note 1]

2014

2013

2012

2014

2013

2012

1. Total of (1) to (3)

26

26

20

141

140

141

(1) Financial institutions reporting to
the Tokyo Foreign Exchange
Market Committee

19

21

15

124

109

110

(2) Other financial institutions reportingto the BOJ (excluding (1))

2

1

2

2

2

9

(3) Other financial institutions reportingto central banks (foreign)(excluding (1) and (2))

5

4

3

15

29

22

2. Other firms used for cover transactions notincluded in 1. above (total of (4) and (5))

32

30

35

68

63

78

(4) Domestic firms

12

10

13

31

27

30

(5) Foreign firms (total)

20

20

22

37

36

48

U.S.

2

3

7

3

5

21

U.K.

9

9

7

14

13

8

Singapore

4

4

4

15

14

14

Australia

3

1

1

3

1

1

Others [Note 2]

2

3

3

2

3

4

Grand total
58
56
55
209
203
219
Note 1: Total number of firms used for cover transactions by members handling over-the-counter retail FX margin trading
after grouping them by classification.
Note 2: Malaysia, New Zealand, Ireland, and Belize

7

Financial institutions that participate (report) in the "Results of Turnover Survey of Tokyo Foreign Exchange Market" of
the Tokyo Foreign Exchange Market Committee are referred to as "Financial institutions reporting to the Tokyo Foreign
Exchange Market Committee," financial institutions cooperating with the Bank of Japan's triennial "Central Bank Surveyof Foreign Exchange and Derivatives Market Activity" (excluding Financial institutions reporting to the Tokyo Foreign
Exchange Market Committee) are referred to as "Other financial institutions reporting to the BOJ," and financial
institutions cooperating with foreign exchange and derivatives surveys of central banks of other nations (regions) arereferred to as "Other financial institutions reporting to central banks (foreign)." Firms used for cover transactions that do
not fall into the above groups are classified by location of offices.

9(2) Amount of Cover Transactions by Classification of Firms Used For CoverTransactions
Table 5: Amount of Cover Transactions by Classification ofFirms Used For Cover Transactions(Unit: hundred million Yen, %)2014
Classification of Firms Used for CoverTransactions

2013

2012

Amount of
Cover
Transactions

Percentage
of Total

Amount of
Cover
Transactions

Percentage
of Total

Amount of
Cover
Transactions

Percentage
of Total

562,14557.0%

872,99443.1%

334,15647.7%

546,098

55.4%

537,75326.5%

312,265

44.6%

0

0.0%

0

0.0%

0

0.0%

16,047

1.6%

335,241

16.5%

21,8903.1%

423,92343.0%

1,152,765

56.9%

366,13152.3%(4) Domestic firms

347,36235.2%

929,45145.9%

234,01133.4%(5) Foreign firms

76,5607.8%

223,31411.0%

132,120

18.9%

U.S.

9,942

1.0%

18,8080.9%

65,953

9.4%

U.K.

32,667

3.3%

60,0953.0%

31,861

4.5%

Singapore

29,7753.0%

136,950

6.8%

29,6044.2%

Australia

3,089

0.3%

5,972

0.3%

3,781

0.5%

Others [Note]

1,084

0.1%

1,486

0.1%

918

0.1%

986,069

100.0%

2,025,760

100.0%

700,288

100.0%

1. Financial institutions(1) Financial institutions reportingto the Tokyo Foreign Exchange
Market Committee(2) Other financial institutions
reporting to the BOJ(3) Other financial institutions
reporting to central banks(foreign)
2. Other firms used for covertransactions

Grand total
Note:

Malaysia, New Zealand, Ireland, and Belize

Based on the cover transaction amounts in the table above, grouping (1), (2), and (4) together
as domestic firms used for cover transactions and grouping (3) and (5) as foreign firms used
for cover transactions yields results shown in the following table.
Table 6: Past Trend in Cover Transaction Amounts (Domestic and Foreign)

Survey date

Total amount ofcover transactions

April 2014
April 2013
April 2012

986,069
2,025,760
700,288

Domestic cover transactions
Transaction
Percentage ofamounttotal
893,460
90.6%
1,467,204
72.4%
546,27678.0%

10(Unit: hundred million Yen, %)Foreign cover transactions
Transaction
Percentage ofamounttotal
92,6079.4%
354,049
17.5%
87,843
12.5%

(3) Ranking of Members Based on Over-The-Counter Retail FX Margin Trading
Volume and Cover Transaction Amount
Based on the ranking of members by over-the-counter retail FX margin trading volume in themonth of the survey every year, the subject members were grouped and their cover transaction
amounts were tabulated as shown in the following table.
Table 7: Over-The-Counter Retail FX Margin Trading Amounts(By Ranking-Based Groups)(Unit: hundred million Yen)
Survey1st–3rd4th–10th 11th–20th 21st–30th 31st–40th
41st
Total
(total amount)month/year
place
place
place
place
place
place–
April 2014 1,295,357
676,813369,840
70,01727,084
8,236
2,447,350
April 2013 2,093,296 1,523,692
586,132
163,396
49,501
5,173
4,416,019
April 2012
559,208
438,497
176,432
71,18528,1505,500
1,278,975* Amounts and rankings in this table are based on monitoring data. As a result, the figures do not matchthe amounts listed in Part One, 4.–(1)Table 8: Cover Transaction Amounts (By Ranking-Based Groups)
Surveymonth/year
April 2014
April 2013
April 2012

1st–3rdplace
264,476
467,500
64,558

4th–10thplace
354,287
863,764
390,440

11th–20thplace
275,918
519,334
144,234

21st–30thplace
58,878122,196
63,20431st–40thplace
24,41947,99533,150(Unit: hundred million Yen)
41st
Total
(total amount)place–
8,089
986,069
4,969
2,025,760
4,699
700,288

Table 9: Percentage of Cover Transaction Amount to Over-The-Counter Transaction
Amount (By Ranking-Based Groups)(Unit: %)Surveymonth/year
April 2014
April 2013
April 2012

1st–3rd place
26.8%
23.1%
9.2%

4th–10th
place
35.9%
42.6%
55.8%

11th–20th
place
28.0%
25.6%
20.6%

21st–30th
place
6.0%
6.0%
9.0%

31st–40th
place
2.5%
2.4%
4.7%

41st place–
0.8%
0.2%
0.7%

Table 10: Percentage of Cover Transaction Amounts by Ranking-Based Groups(Table 8) to Over-The-Counter Retail FX Margin Trading Amounts
by Ranking-Based Groups (Table 7)(Unit: %)4th–10th
11th–20th
21st–30th
31st–40th
41st place–
place
place
place
place
April 2014
20.4%
52.3%
74.6%
84.1%
90.2%
98.2%
April 2013
22.3%
56.7%
88.6%
74.8%
97.0%
96.1%
April 2012
11.5%
89.0%
81.8%
88.8%
117.8%*
85.4%
Note: There is a case in which the cover transaction amount exceeds the over-the-counter retail FX
margin trading amount (the figure is higher than 100%) due to such reasons as transfers of
positions due to a change in the firm used for cover transactions and transactions made in error.
Survey date

1st–3rd place11Part Three: Conclusion of this Survey (Review)As can be seen in Chart 1 below, in April 2014, the month covered by the latest survey, the
USD/JPY FX market, which makes up a large percentage of FX margin trading, wasrelatively stable as compared to the periods covered in the past two surveys (April 2012 andApril 2013). Both Implied Volatility (orange line and right-axis in Chart 1), which reflects
projected market fluctuations by market participants, and Historical Volatility (purple line andleft-axis) were at low levels.
Under these low-volatility conditions in the market, over-the-counter retail FX margin trading
operators increased the percentage of internal circulation (marry) that incorporates market
risks, and as a result, the percentage of external circulation (cover transactions) declined by
5.5 percentage points, from 45.8% last year to 40.3%. Based on interviews and otherinformation collected from companies, the reason for the decrease in external circulation isbelieved to be over-the-counter retail FX margin trading operators having increased marrytransactions to adapt to low volatility, and also because their customers also increased trading
techniques that aim for reversing trade in short periods.
However, external circulation (cover transactions) stemming from over-the-counter retail FX
margin trading as a percentage of transactions with non-financial customers (domestic) on theTokyo FX market rose 3.6 percentage points, from 67.81% last year to 71.41%. This figure
has remained high, suggesting that external circulation (cover transactions) has a considerable
presence in the Tokyo FX market.8
Chart 1: USD/JPY Currency Pair Trend Seen Through Currency Option Volatility
Price
Price

Automatic

Automatic
2012 Q2

2012 Q3

2012 Q4

2013 Q1

2013 Q2

2013 Q3

2013 Q4

2014 Q1

2014 Q2

Source: Thomson Reuters
8

Of external circulation (cover transactions, etc.) generated by over-the-counter retail FX margin trading operators,
transactions with financial institutions participating in the Tokyo Foreign Exchange Market Committee's survey
accounted for 97.82% of "transactions with non-financial customers (domestic)" disclosed by the Committee in April
2012, 67.81% in April 2013, and 71.41% in April 2014.

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