Global foreign exchange (FX) derivatives reached $6.6trn in average daily turnover (ADT) in April 2025, roughly double its level in 2013, according to a new report from the International Swaps and Derivatives Association (ISDA).
Activity was driven by high volatility, the need for enhanced hedging against currency risk, and an expansion of electronic trading. FX swaps remained the most actively traded in April 2025, with ADT rising modestly to $4 trn from $3.8 trn in April 2022.
However, they were not the biggest contributor to growth. That accolade went to outright forwards which saw ADT jump to $1.7 trn from $1.2 trn. This constituted about half of the market’s total expansion and culminated in a 26.6% market share in 2025, up from 21.5% in 2022.
Drilling down further, FX options experienced the fastest trajectory on a percentage basis with ADT climbing by a hefty 107.6% to $631.7 bn in 2025 from $304.3 bn in 2022. This lifted their market share to 9.6% from 5.6% over the timeframe.
Meanwhile, currency swaps continued to be a small but steadily growing segment with a 2% to 3% slice. Their turnover rose by 32.4% to $164.1 bn from $123.9 bn during the period.
In terms of regions, it is no surprise that the UK, home to London – the world’s largest FX trading centre – led the way with a 37.7% chunk of global turnover. The US followed at 14.9%, which was slightly lower than prior years while the European Union, had 10.4%.
The main participants were dealers handling almost 50% of global turnover with the rest scattered between smaller banks, investment firms, asset managers, hedge funds, pension funds, insurance companies and central banks.
However, as a new National Bureau of Economic Research working paper shows, their usage differs (https://www.nber.org/papers/w34588). Analysing a dataset covering 100m FX derivatives transactions in London, the researchers map how different players interact day by day. Their findings show that exchange rates are influenced not just by macroeconomic news, but by who is trading and why.
It noted that pension funds, investment funds, insurers and non-financial companies mainly employ FX derivatives to hedge currency risk, especially exposure to the US dollar. Dealer banks, on the other hand, absorb these hedging positions and provide liquidity to the market.
By contrast, hedge funds use FX derivatives primarily to speculate, frequently changing positions in response to interest rates, economic news and momentum strategies. These trades play a key role in transmitting monetary policy shocks into exchange rate movements.
The study also highlighted the growing importance but less visible group: non-bank market makers, who often end up holding the residual currency risk created by speculative trading, even though they keep little long-term exposure overall.
Crucially, the researchers show that FX derivatives trading is not just a sideshow to spot markets. Speculative flows by hedge funds help drive currency appreciation after interest-rate surprises, while the unwinding of hedges by investment funds can fuel dollar strength during periods of rising financial stress.
