Shrinking global trade in currencies is stinging banks, partly due to a lull in the euro zone crisis, and dealers face job cuts as volumes are likely to drop further next year. Falling business since the middle of 2012, accompanied by lower market volatility, have left banks struggling to make money out of currency dealing.
"The drop in volumes in the market has impacted everyone, every bank on the street," said George Athanasopoulos, who co-heads global foreign exchange and precious metals at UBS.
A global economic slowdown has helped to dampen volumes for some time, along with ultra-low interest rates in many countries which have dimmed the appeal of buying one major currency against another.
European Central Bank President Mario Draghi seems, probably unintentionally, to have accelerated the trend when he promised in late July to do "whatever it takes to preserve the euro".
Draghi's comments, followed up by a conditional ECB plan to buy the bonds of troubled euro zone governments, restored relative calm to the markets and limited the euro's fall.
This in turn helped to reduce the currency swings which normally allow foreign exchange (FX) dealers to make profits.
Between August and November, volume on the CLS system, which settles the vast majority of currency transactions, fell by 11 percent year-on-year. The two major electronic trading systems - EBS, owned by ICAP Plc, and Thomson Reuters - reported annual falls in trades of one currency for another of around 40 and 25 percent respectively.
"The whole industry's volumes are lower. This year has been relatively devoid of directional trends, which has made it a more challenging year for many participants," said Adrian McGowan, head of FX trading for Europe at Barclays.
A similar gloomy picture emerged from interviews with global heads of currency trading at six major banks, including the top five in Euromoney's 2012 survey of the biggest banks for FX deals.
Currency trading volume rose steadily until 2011 when CLS data showed the average daily value topped $5 trillion, before turning lower this year. There is little respite in store, with large banks preparing for "a challenging year from a volume standpoint", said one trading head at a European bank.
SEB global head of FX trading, Robert Celsing, said volumes could drop by 10-20 percent in 2013.
In recent months, implied volatility - a measure of expected future price movements - in many major currency pairs has hit its lowest since before Lehman Brothers collapsed in 2008, setting off the global financial crisis.
And the possibility of increased financial market regulation for banks could hurt volumes further.
Trading volume is also down in other asset classes, with turnover in European equities trading at its lightest since 2009.
Exacerbating the drop in volumes, shallow price swings in currency markets have reduced the opportunity for high-frequency trading, a strategy that uses technology and computer algorithms to carry out a large number of transactions rapidly.
Continued low volumes could see banks cut back further on their foreign exchange headcount, with desks already smaller due to the expansion of electronic trading in recent years.
Mike Goggin, managing director at London recruitment firm Brookleigh, said banks had cut foreign exchange staff, although not by as much as in other asset classes. He said there were likely to be more cuts in FX sales staff than among traders, simply because trading desks were already small.
One major bank's London FX spot trading desk has shrunk from six to four this year, according to a trader at the bank, who said several other banks' desks were now a similar size.
Swedish bank SEB plans 10-20 percent cuts in FX information technology and staff costs over the next three years, SEB's Celsing said. "You have to adjust, otherwise you would sit with too high costs and not be profitable."
What volume there is in foreign exchange is being snatched by the largest banks, whose aggressive investment in electronic trading platforms means they can offer better pricing to clients. But offering lower prices has knocked profits.
"Margins have been compressed for the industry, so we'll be slightly down on last year in revenues," said Kevin Rodgers, global head of FX sales and trading at Deutsche Bank.
This is despite the fact that the German bank, which has topped Euromoney's survey of top banks for FX transactions for eight years running, reported quarters of "record volumes".
Jeff Feig, global head of G10 FX at Citi, which jumped to second in Euromoney's 2012 poll and grabbed market share from Deutsche, also said margins had contracted significantly even as Citi's volumes were set to rise 20-30 percent this year.
Volumes for fourth- and fifth-rated UBS and HSBC also rose. The much smaller SEB saw volumes rise around 4 percent on the year because the euro zone debt crisis raised demand for Scandinavian currencies. But Celsing said income was below last year's, and he feared a "more brutal" margin squeeze. "You have to realise that the volume's come down and it's going to stay low for quite some time," he said.
Still, some remain optimistic. "Over 25 years I have seen many periods where people have said FX volumes are falling ... each time the market's come back with higher volumes," said Mark Johnson, head of FX cash trading at HSBC.
Higher volumes will require a catalyst, for example an improvement in the global economy and trade. A Greek departure from the euro zone, which would force Athens to resurrect its drachma, or a complete euro break-up would create more currencies but little else positive.
"The ever so slight gain of being able to do euro/Greece would be a tiny silver lining in a gigantic dark grey horrible cloud of human suffering, capital controls and general economic misery. I don't think for a moment it would be worth it for the market," Deutsche Bank's Rodgers said.
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