The figures show that the average daily turnover of the UK foreign exchange market was $637bn per day in April, an increase of 37 per cent on the same month three years ago.
The daily turnover in over-the- counter derivatives was $171bn in the UK in April, almost twice the level of the United States, which ranked second in the survey. The UK figure showed a 131 per cent rise over the past three years as London stretched its lead on rival financial centres.
The Bank of England stressed that the derivatives figures were for "off exchange" transactions between institutions and that trading on exchanges such as LIFFE could be as much as "10 times those figures."
However, London's leading position makes the Square Mile more exposed than any other financial centre given the recent turmoil in financial markets caused by hedge funds such as Long Term Capital Management.
The Bank of England refused to comment on the actions of hedge funds and how they might be regulated in the future. John Footman, the Bank's deputy director of financial stability, said: "I don't want to offer any prescription on that. That will be one of the issues that will be raised in Washington next week [at the International Monetary Fund and World Bank meetings]."
However, its figures showed that in certain markets, such as interest rate business, the share of the market accounted for by "other financial institutions" such as hedge funds, pension funds and building societies, grew from 9 per cent in 1995 to 24 per cent this year. It is thought that hedge funds would have accounted for most of the rise.
The figures are part of a survey carried out once every three years by the Bank of England on behalf of the Bank for International Settlements.
In foreign exchange trading the 37 per cent increase in the average daily turnover to $637bn represented a slower rate of growth than the 43 per cent reported in the US and was down sharply from the 60 per cent rise reported for London three years ago. Even so, the figure was 82 per cent higher than New York, London's nearest rival.
The Bank of England said that the slower rate of growth in foreign exchange trading compared with derivatives was because foreign exchange was a more established, mature market.Reuse content