HSBC claims top FX forwards spot as US banks fall back

Counterparty Radar: Morgan Stanley falls from pole position for first time since Q2 2021 amid wider volume decline

HSBC-top-in-FX-forwards montage

HSBC has become the top foreign exchange forwards dealer for US mutual funds for the first time, leaping from fifth spot to first in the second quarter on the back of a surge of trading with Pimco and reduced trading at some of its US rivals.

Despite the recent rise in FX volatility, the overall market declined by more than $133 billion to $920 billion over the quarter – down from $1.05 trillion in Q1 – according to data from disclosures made to the US Securities and Exchange Commission that have been gathered and analysed by FX Market’s Counterparty Radar service.

The majority of mutual funds shrunk their positions in G10 pairs but most of the volume decline came from Vanguard – the fund giant cut its exposure by roughly $79 billion, mostly in euro/US dollar.

The changing market conditions benefitted HSBC, though. Managers had $87.3 billion in notional amounts of forwards on their books with the bank at the end of the quarter – up nearly $11.5 billion from the Q1, taking it into top spot.

Previous leader Morgan Stanley saw its FX forwards positions reduce by $42.5 billion – the largest fall of all the dealers – knocking the bank out of first position to second overall for the first time since Q2 2021.

This was largely due to Pimco moving a large chunk of business away from Morgan Stanley while simultaneously increasing trades with HSBC.

TD Securities and State Street reported a drop of $19.5 billion and $25.3 billion, respectively. This was a result of Vanguard – which previously awarded a large number of trades to both banks in the first quarter – cutting a sizeable amount of their exposures with the two institutions. As a result, TD slipped from fourth to seventh, while State Street fell from second to sixth.

Other US banks that saw a reduction in business include JP Morgan and Citi, dropping nearly $10 billion and $8 billion, respectively.

US banks have been hit hard by the increased capital costs brought on by the standardised approach to counterparty credit risk, which has made it substantially more expensive for them to conduct short-dated FX swaps and forwards trading, forcing some to increase spreads.

However, Bank of America reported a slight increase in the size of its book to $70.6 billion, taking it to fourth in the overall rankings. Fidelity conducted almost half of its forwards trades with BofA.

Societe Generale recorded the largest growth of all forwards dealers, thanks mainly to Pimco, with whom the French bank increased exposures by more than $14 billion in Q2.

Of the top five G10 pairs, Australian dollar/US dollar was the only one where mutual funds increased the size of their positions.

On the manager side, the other main movers were John Hancock and Eaton Vance, which entered the top 10 in the rankings this quarter.



About this data


The information used in this analysis comes from Nport-P filings to the US Securities and Exchange Commission. This is a relatively new form, introduced at the end of 2019, which requires mutual funds and exchange-traded funds to file monthly summaries of their portfolio holdings to the SEC. 

The filings include FX forward transactions that were live at the time of the filing, and include details such as bank counterparty names, currencies, trade sizes and remaining maturity. The forms are filed to the SEC on a monthly basis, and the regulator makes the final filing of each fund’s quarter public 60 days after the end of that period. The filings are in a structured XML form, making it possible to download and parse the data for trends. 

It’s important to caveat the information. While these are pro forma regulatory filings to the SEC and should be accurate, mistakes and miscategorisations do occur. The data was cleaned and obvious errors excluded.

As the database is updated and improved periodically, data presented may not mirror information published in previously stories. Each story reflects the most accurate representation of data at the time of publication.

Information from these filings is also the basis for a new tool, Counterparty Radar, which allows users to search the filings information themselves to discover the most popular dealers and most active managers for FX forwards and options. We will track these stats every quarter, so please get in touch if something doesn’t look right, or to suggest other ways to present the data: [email protected]

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