Is the gargantuan currency market actually getting overcrowded?
| Mar 13th, 2011 | Filed under: Hedge Fund Industry Trends, Today's Post | By: AAA Staff |
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The daily turnover in the world’s biggest market, currencies, hit four trillion dollars last year according to the latest triennial survey from the Bank for International Settlements (“BIS”), published in December. Who would ever think to ask if traders could get claustrophobic in such a huge market?
Yet that is exactly what currency manager Momtchil Pojarliev and NYU Professor Richard M. Levich ask in their latest of several seminal research articles on currency funds (previous notable paper). The question of capacity is germane to one of BIS’s primary objectives: promoting international financial stability, given how regulators see crowded trades as a “systemic risk” factor (along with bankers’ bonuses, housing bubbles, over the counter derivatives, etc.).
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