Japan's monetary easing prompts volumes jump on forex platform

LONDON, Nov 6 (Reuters) - Daily spot foreign exchangevolumes hit a three-year high on trading platform EBS on Oct.31, the day the Bank of Japan stunned markets with another doseof monetary easing, boding well for currency markets and tradingbanks.

The surge in EBS volumes means that a recovery in tradingactivity extends well into its second month and is likely toshore up banks' profits from the buying and selling of foreignexchange in the fourth quarter.

"Following the Bank of Japan's announcement to expand itsquantitative easing programme, total daily volume on EBS Marketwas $228 billion and overall EBS total daily volume was $250billion," EBS, which is owned by ICAP, said in astatement.

To put it in perspective, that was almost double the averagedaily volumes seen in October, which was at $129.9 billion, up69 percent from a year ago. Average daily volumes were at $117.9billion in September.

Last Friday the BoJ said it would triple its purchases ofexchange-traded funds (ETFs) and real-estate investment trusts(REITs) and buy longer-dated debt, sending Tokyo shares soaringand prompting a sharp sell-off in the yen.

EBS is one of the main venues for banks and other majorplayers trading dollars, euros, yen and Swiss franc. InSeptember volumes in the foreign exchange market rose to arecord high of nearly $6 trillion a day, driven by a spike involumes on EBS and its competitor Thomson Reuters.

Volumes in the currency market started reviving in Septemberamid higher market volatility fuelled by political events andthe dollar's global rally.

Volatility, which tends to drive volumes higher byincreasing the potential returns for traders, had been at oraround record lows for the first six months of the year,stemming activity among major dealers.

But events ranging from Scotland's September referendum onindependence to surprise dovish policy messages from the Bank ofEngland and European Central Bank spurred activity andvolatility over the past two months.

In contrast to the ECB, the Bank of Japan and the Bank ofEngland, the Federal Reserve is widely expected to starttightening monetary policy next year. As such, volatility hassurged on the back of a growing divergence between monetarypolicy and interest rates in the world's biggest economies.

(Reporting by Anirban Nag; Editing by David Goodman)