LONDON, April 21 (IFR) - Equity derivatives saw their share
of the exchange-traded derivatives market fall below 50% for the
first time on record during 2016, data from the World Federation
of Exchanges show.
The annual review of listed derivatives markets, based on
statistics from 47 exchanges globally, shows overall growth of
more than 2% across all asset classes, driven by demand for
commodity derivatives and increased activity in interest rate
and currency contracts.
Equity derivatives retained their position as the largest
product group, representing 45% of the overall market, but their
share continued to decline after peaking in 2011. A total of
11bn equity derivatives contracts were traded over global
exchanges in 2016, down 11% on the previous year.
Europe and Asia led the losses, with equity derivatives
volumes down by over 20% in each region. US activity defied the
malaise, rising by 5.5% as investors traded around the US
presidential election and positioned for the Trump reflation
trade, which is expected to provide support to equity markets.
Stock index options suffered the most acute declines with
volumes down 26% at 2.8bn contracts. Index options traded over
US exchanges, however, were up almost 50% for the year. That
helped to cushion a sharp fall in Asia-Pacific, where a 41%
decline in activity drove the region’s market share in the
products to fall to under 60% from over 75%.
India was the biggest contributor to the slump as index
options traded over the National Stock Exchange of India fell by
45% to just over 1bn contracts. At the other end of the
spectrum, CBOE posted a 64% increase in index options, while the
Moscow Exchange recorded a 55% jump.
ETF options provided a rare bright spot. With volumes up
almost 7%, the products accounted for around 15% of total listed
equity derivatives volumes. A total of 1.7bn of the contracts
changed hands over the year, dominated by the Americas, with a
38% jump in activity on BATS Global Markets and a 34% increase
on the Montreal Exchange.
Commodity derivatives were the biggest gainers, with volumes
up 28% at 6.8bn contracts as investors rushed to hedge volatile
oil prices. A strong 2016 adds to a long-term growth trajectory
for the products, which have experienced a 22% compound annual
growth rate since 2005 according to WFE.
“The swing from equity to commodity derivatives in the
Asia-Pacific region is a particularly interesting shift, and one
we started to see in 2015,” CEO of WFE Nandini Sukumar said in a
statement. “This trend towards commodity derivatives is also
mirrored in EMEA and the Americas, with growth of 57% and 13%,
respectively, supported by strong growth in agriculture, base
metal and energy contracts.”
Commodity derivatives trading was centred on three exchanges
with the Dalian Commodity Exchange, the Shanghai Futures
Exchange and CME Group accounting for over 62% of volume for the
year. All three exchanges posted double-digit growth in
commodity contracts while the Moscow Exchange saw volumes almost
Growth in currency derivatives followed close behind
commodities with a 27% CAGR since 2005. Volumes were up over 10%
in 2016 with Asia-Pacific leading the charge. Interest rate
derivatives volumes were up 5.5% with all regions contributing
to the growth.
(Reporting by Helen Bartholomew)