turnover, primarily in the uk and to a lesser extent, the us. the growth in the uk was principally on electronic broking platforms, while that in the us was mostly on ecns. given the electronic broking platforms reuters and ebs are uk - based and the ecns, mostly usbased, this is consistent with hft being a significant contributor to the increase in turnover, given their preference to trade in these marketplaces. in the report, we calculate an upper - bound estimate for hft. this estimate is based on the fact that around 45 per cent of trading on ebs and reuters ( depending on the currency pair ) is automated. given that electronic trading itself is around 50 per cent of spot foreign exchange trading, this would imply that hft could be around 25 – 30 per cent of all foreign exchange turnover. 5 haldane a ( 2011 ), “ the race to zero ”, speech at the international economic association sixteenth world congress, “ approaches to the evolving world economy ”, beijing, 8 july. see the 2010 bis triennial survey on foreign exchange market activity and particularly m king and d rime ( 2010 ), “ the $ 4 trillion question : what explains fx growth since the 2007 survey? ”, bis quarterly review, december, pp 27 – 42. the increased market presence of hft and the impact it is having on the market structure does, however, highlight the need to reassess the way that we are measuring foreign exchange turnover in the bis survey. bis central bankers ’ speeches effect on price discovery and liquidity what has been the effect of hft on the market? the most obvious impact is that spreads are tighter in normal times, particularly at the top of the book. there are questions about the quality of liquidity, however, with claims that liquidity has been impaired for larger orders. moreover, as we note in the report, the quality of a bid or ask is determined by more than just its price. the size of the quote and its longevity matters too. the effect of spread compression and depth of book, however, is mostly an issue of redistribution of profit around the marketplace. a number of complaints levelled at hft firms often reflect the fact that they are taking margin from the party complaining. one example of this is the accusation of predatory pricing. this is sometimes mislabelled front - running. but front - running implies advance “ insider ” knowledge of a trade. hft firms don ’ t have advanced

to the subprime market or to complex structured products in domestic financial systems has surely helped in this regard, but there are more structural reasons. in particular, there has been an important reduction of the financial vulnerabilities that were widespread in the past, and which led to costly crisis with important output losses and poverty increases, as the asian crises ten years ago crudely demonstrated. many emerging market economies have reduced their financing needs and improved their debt management. many more run current account surpluses which reduce their reliance on external funding. most have accumulated massive international reserves, well in excess of what would be needed for precautionary reasons. all in all, this paints a very different picture as compared to past episodes of global turbulence, when these economies used to be not only “ influenced ” by the ups and downs of the changing risk preferences in global financial markets, but simply “ driven ” – even “ drowned ” – by them, sometimes regardless of their economic fundamentals. in my view, this separation from the main stream of the turbulence constitutes an achievement in itself. from other stand point, it is certainly striking that in this period of global financial turbulence inflation is identified as the key economic challenge for emerging economies. indeed, the rise of inflationary pressures on food prices derived from the commodity boom, is becoming a very worrying concern. the large change in relative prices that underlies this prolonged boom is having a stronger impact on developing economies, with very negative and substantial effects on the well being of the poorest portions of their populations. therefore, as inflation creeps up the concern of policymakers deepens, not only in the sphere of macroeconomic stability, but beyond. in connection with this, the fact that monetary policies have remained focused on inflation stability in most emerging market economies is an additional novelty to mention in the context of the present turmoil. going a step forward, it is also noteworthy that emerging market economies, and in particular asia – with china at its centre – may become some kind of a “ spare engine ” to world growth, buffering the impact of the turbulence on global activity. this idea of a “ second pillar ” for growth relies mainly on the observed strength of domestic demand in asia, and the key issue here is whether this strength could be self - sustaining. maybe, we will not be able to answer this question thoroughly until the macroeconomic impact of the turbulence unfolds completely and the trade channel works itself out. but, one aspect that is clear – even now