: / / www. sifma. org / research / statistics. aspx. bis central bankers ’ speeches changes to market structure the foreign exchange market is a dynamic market with a long history of change and innovation. today, i would like to focus on two of the more significant recent changes in the market ’ s structure : first, the broadening of participation, and second, how execution is taking place within the market. participation in the fx market the broadening of participation in the foreign exchange market is one reason why growth in fx trading volumes has far outpaced growth in global trade. the bis triennial survey on foreign exchange market activity provides evidence of the degree to which this expanded participation is taking place. 4 traditionally, volumes in the foreign exchange market were dominated by what is known as the inter - dealer market – trading between dealers. however, in the 2010 survey, the largest share of volume reported by dealer respondents was for transactions with “ other financial institutions ” – a category that includes nonreporting banks ; 5 other financial institutions such as institutional investors, hedge funds, and proprietary trading firms ; and official sector institutions. this shift continued through the 2013 survey, when “ other financial institutions ” accounted for just over half of reported volume, reinforcing evidence of a broadening in foreign exchange trading, with nondealers playing a greater role in the market. the 2013 survey broke out the “ other financial institutions ” category for the first time. the data showed that nonreporting banks accounted for about 45 percent of the category ’ s trading volume while institutional investors and hedge funds / proprietary trading firms each accounted for about 20 percent. in a market where daily trading volume exceeds $ 5 trillion, this represents significant activity and is consistent with a general theme of increased participation by nondealers in the fx market. execution in the fx market one factor contributing to the expansion in participation by nondealers in the foreign exchange market has been the increased ease of entry into the market, attributable to an expansion in the number of execution platforms and services. in part, this has been supported by technological advancements, which, in some cases, have reduced trading costs, increased the speed with which transactions take place, and improved transparency. electronic trading activity in foreign exchange markets, as well as in other markets, has played a growing role, and some reports suggest it may represent as much as 70 percent of daily turnover in the foreign exchange market, up from roughly

round - trips in prices on march 18, 2015, in the eurodollar currency pair and on october 15, 2014, in the u. s. treasury cash and futures markets – have suggested the possibility that advancements in automated trading and changes in market structure may have improved liquidity in normal times but left markets prone to more frequent bouts of illiquidity during which price formation appears disconnected from fundamental information. structural developments and the connection to liquidity and price discovery across markets warrant further study. see also recent comments by lael brainard, member of the federal reserve board of governors. recent changes in the resilience of market liquidity. http : / / www. federalreserve. gov / newsevents / speech / brainard20150701a. htm. bis central bankers ’ speeches have resulted in damage to the integrity of the global fx market – damage that will not easily be undone. the behaviors that triggered these criminal and regulatory actions illustrate that, for many, self - interest and the lure of near - term gains were put above the preservation of the market ’ s integrity and long - term sustainability. 8 the resulting loss of the public ’ s faith and trust in this critical market comes with a cost : let ’ s recall that it is ultimately the public that stands to lose from an fx market unable to play its vital role in the global economy. the fx market is considered by many to be relatively lightly regulated, particularly in the fx spot market. regulatory treatment across jurisdictions varies. 9 regardless of who regulates in a given region, in the absence of a single centralized and comprehensive global regulator of this highly global market, collaborative efforts between the private and official sectors play an important role. these efforts help us to better understand the roots of the misconduct and the misalignment of incentives that contributed to weaknesses in trading structures and encouraged unethical and illegal activities. and they can also play an important role in elevating best practices in order to promote a sound, effective fx market going forward. in the remainder of my remarks, i ’ ll discuss three examples of such work. first, the recommendations of the financial stability board ’ s foreign exchange benchmarks group. second, the work of the various foreign exchange committees, including the new york fedsponsored foreign exchange committee ( fxc ), to provide more detailed, globally harmonized guidance through an expanded global preamble to the existing regional codes of conduct. and third, the expansion