Al figures in this article are in Ecu unless otherwise specified. The Ecu is worth 70p at central parities.
This article reviews recent developments in Ecu securities markets and the initiatives taken by the UK authorities to promote them. These markets are continuing to evolve from a small and rather illiquid sector of the Euromarkets towards being a large and liquid market containing all the instruments to be found in the most developed national markets. This process is market-led, with financial market participants bringing expertise drawn from national markets around the world to Ecu securities markets in order to meet the rapidly-developing needs of investors worldwide. Market development is also being facilitated by the actions of the authorities in many European financial centres.
London-based participants have been instrumental in creating and developing Ecu markets, drawing on the pool of talent and expertise represented in the American, European and Japanese firms which have based their European financial operations in London, as well as on the strong domestic traditions of financial innovation and professionalism.
Liquidity and turnover in securities markets have grown very fast, in parallel with rapid growth in the deposit and foreign exchange markets. Between early 1984 and end-September 1991 liabilities in Ecu of banks in the BIS reporting area grew from 17 billion to 183 billion, and have more than doubled in the last three years; UK banks' share of the total grew sharply in 1984 and 1985 and has since ranged between 25%-30%. London emerged as the largest Ecu financial centre in 1988, and has maintained that position. There is less evidence on activity in the foreign exchange markets. In April 1989, twenty-one central banks participated in a survey of activity in their local markets covering all the major centres except those in Germany. At that time, average daily Ecu turnover worldwide was estimated at ECU 8 billion, of which half was in London. Although this is a very large absolute number, turnover in Ecu was then only 1 % of total turnover in foreign exchange. There is anecdotal evidence that Ecu-associated foreign exchange activity has grown sharply since then. Central banks conducted a further co-ordinated survey of foreign exchange activity in April this year: the results, when available, will provide more detailed information on Ecu activity.
Published on
01 June 1992
Ecu securities markets