Australia sees 37% decline in forex OTC options, says Afma

Trading in over-the-counter foreign exchange options fell by more than a third over 12 months to the end-June this year, according to figures released by the Australian Financial Markets Association (Afma).

The turnover of OTC options fell 37% for the period to A$1,242 billion ($939 billion), down from the A$1,983 reported for the previous year.

Bernard Yeung, senior dealer at HSBC in Hong Kong, said the NAB options trading fraud could have been one of the drivers of the drop. "The banks in Australia have probably tightened up, and will want to make sure these things don't happen again. They will want to wind down a little bit until the news and (negative) sentiment passes," Yeung said.

Relaxed rules enabling Australian entities to deal with overseas market-makers that do not have an Australian financial service licence mean more transactions may be transacted elsewhere, according to Yeung.

"A lot of Australian corporates will now also use a lot of the centres in Tokyo, Singapore and Hong Kong versus the local banks in Australia. It is so transparent now, they can be in Australia but they don't necessarily have to trade with Australian banks anymore," he said.

The dip in OTC forex options came amid a 13.8% increase in OTC financial markets, of which interest rate options saw a 126% surge. Less significant was the 0.25% fall in foreign exchange turnover from 2004 to 2005, at A$31,759 billion.