However, in the 2010 survey, the largest share of volume reported by dealer respondents was for transactions with “other financial institutions” – a category that includes nonreporting banks; 5 other financial institutions such as institutional investors, hedge funds, and proprietary trading firms; and official sector institutions. This shift continued through the 2013 survey, when “other financial institutions” accounted for just over half of reported volume, reinforcing evidence of a broadening in foreign exchange trading, with nondealers playing a greater role in the market. The 2013 survey broke out the “other financial institutions” category for the first time. The data showed that nonreporting banks accounted for about 45 percent of the category’s trading volume while institutional investors and hedge funds/proprietary trading firms each accounted for about 20 percent. In a market where daily trading volume exceeds $ trillion, this represents significant activity and is consistent with a general theme of increased participation by nondealers in the FX market. Execution in the FX market One factor contributing to the expansion in participation by nondealers in the foreign exchange market has been the increased ease of entry into the market, attributable to an expansion in the number of execution platforms and services. In part, this has been supported by technological advancements, which, in some cases, have reduced trading costs, increased the speed with which transactions take place, and improved transparency.
But what is driving the growth of London in particular? One approach to this question is to ask executives in major financial companies, both in the UK and abroad, why they choose to locate business here. A number of these surveys have been conducted recently and they show several common factors. 11 London benefits from English as an international language of commerce, and from its time zone, which means the working day overlaps with Asia in the morning and America in the afternoon. London also has well established financial infrastructure and telecommunication networks. Many of those surveyed point to the regulatory and legal environment. This is partly a matter of the regulatory style – the “risk based and proportionate” approach that the Financial Services Authority has adopted based on general principles where possible. It is partly the simplicity of dealing with a single regulator. 10  Caballero, R. “On the macroeconomics of asset shortages” NBER WP 12753, December 2006. 11  For example, Cook, G. A. S., Pandit, N. R., Beaverstock, J. V., Taylor, P. J. and Pain, K. (forthcoming in 2007). “The role of location in knowledge creation and diffusion: Evidence of centripetal and centrifugal forces in the City of London financial services agglomeration”. Environment and Planning A. 4  BIS Review 29/2007  English law, which is also the basis for financial services law in the United States, prevails here, with the added advantage that practitioners are less likely actually to invoke the legal system.