DowntownForex

A Comparative Study of Emerging Forex Markets: Russia, India and South Africa Are The Most Mature

By Forex Magnates -

Russia, India and South Africa were the most mature of 14 emerging forex markets studied, using data from the last (2007) BIS survey of central banks. They each scored more than 50 on the Market Maturity Index (MMI), suggesting they are more than halfway there, as compared to the fully mature markets, like the US.

The MMI was developed as a composite of the Relative Liquidity Index (which has historically been used to measure market maturity) and a Market Sophistication Index, which incorporates a range of other variables – cross border transaction volumes, domestic volumes traded by non-financial players (real sector players), volumes traded domestically by investment entities (hedge funds and the like), and volumes of derivatives transacted.

Prepared by Mecklai Financial the MMI enables a more tailored way of looking at different elements of maturity and can assist central banks by providing direction to deregulation.

Over the past couple of years, the Indian market has developed quite considerably, both in liquidity and sophistication. Daily volumes rose from $ 34 billion in April 2007 to $ 53 billion in April 2008, before falling to $ 44 billion in April 2009. which is quite high but less than FXCM and Oanda combined… (leverage makes the difference i guess).

The study shows that Russia was by far the most mature market in terms of its MMI. The Indian market, which came in second on the MMI, has the highest market sophistication index. The South African market, which was also highly liquid, came in third, with an MMI score very close to India’s.

This is important as these markets will soon open up for retail forex trading which is still in its infancy there. This is also very interesting from institutional point of view as right now only small number of institutional traders trade currencies like the Rupee or Ruble. The more mature and sophisticated these markets get the closer forex gets to being a perfect market.

Full study is embedded below:

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