The research shows that the growth in volumes is largely due to institutions already using electronic trading systems shifting more business online.

Overall almost 40% of all institutions globally traded FX via the Internet last year, up from 32% in 2002, and these online traders executed 43% of overall volume through electronic systems, up from 32% in 2002. In terms of transactions, online traders executed almost half (47%) of all tickets electronically, up from 37% in 2002. Greenwich Associates says the big increases in online FX volumes are likely to continue in 2004 and the number could easily top 50%.

Demand for online FX trading is the highest in the US, where half of all institutions were trading online in 2003, up from 38% a year before. The percentage of European respondents trading online grew to 45% in 2003, from 34% the year before. The UK saw the highest level of growth in Europe, with 49% of institutions trading electronically, up from 36% last year. But the research found that only 28% of Asian institutions are trading online, just three per cent more than in 2002.

Greenwich says despite expectations of consolidation, the number of FX trading platforms in the market has in fact increased. About 60% of online traders use a multi-bank portal, while 45% use single-bank sites and fewer than 15% use both. On average, respondents use roughly 1.5 different e-trading sites.

According to the survey, multi-bank portals from UBS and FXall are leading this e-trading charge, with each claiming a third of the market. Yesterday FXall reported record monthly volumes worth $413bn in March, representing an average of $18bn per day compared with an average of about $10bn a year ago.

Other platforms have successfully targeted specific customers, such as State Street's FXConnect platform which is working almost exclusively with fund managers, while companies like Hotspot and Gain Capital have made strong headway among hedge funds and retail investors.

Despite the high volumes, almost 50% of global FX institutions still say
they have no intention of trading electronically. Two thirds of those institutions said this was because there was simply no need to, while security concerns were cited by 28%. Almost a quarter of respondents cited the loss of 'market colour', and a similar percentage were concerned about the negative impact on their personal relationships with their bankers.

Andrew Awad, consultant, Greenwich Associates, says half the market is open to online trading and half is not: "While the growth that we've been witnessing is impressive, eventually there comes a point at which eFX service providers are going to have to crack that second group if they are to continue to maintain this pace."

However, Greenwich says in many markets institutions indicated that the lack of a true straight-through-processing (STP) system was a major factor in their choice not to trade online. A quarter of those in the UK that do not trade via the Web cited the lack of STP as the prime reason.