Thursday, January 09, 2014 9:11:56 AM

Exchange figures show tough environment for equity derivatives

Equity derivatives volumes, particularly options contracts, faltered in 2013 but some exchange groups registered increased activity in other products, pushing volume figures into positive territory.

The mixed performance is in contrast to strong volume numbers seen across equity markets, which saw trading activity increase by an average of around 5% on both European and US exchanges.

Last year was difficult for derivatives exchanges with incumbents facing increased competition from new entrants at a time when lower market volatility has reduced demand for derivative products.

New European derivatives exchange NLX, launched in May 2013 by Nasdaq OMX, told in December that it has taken a significant share of the crucial Euribor interest rate derivatives market, accounting for 17.6% of contracts traded between 25-29 November. In the US, futures exchange Eris was launched in May 2011 and saw record trading volumes of swap futures last year, with the number of open interest swap futures contracts increasing from 20,000 in January 2013 to 50,000 in September.

InterContinental Exchange (ICE) saw increased trading volumes in its US business, but the European businesses acquired as part of its takeover of NYSE Euronext struggled.

In the US, average daily futures volumes were 16% higher in December compared to December 2012 and were up 6% on a quarterly basis. Full-year contract volume for 2013 reached a record 853 million contracts, up 1% on 2012.

NYSE LIFFE’s US business saw average daily volume of 65,300 contracts last month, down from 72,600 in December 2012, though this was more than double the average of 32,300 contracts seen in November 2013.

Its NYSE Arca and NYSE Amex Options exchanges saw volume fall 13.2% compared to December 2012 to 3.4 million contracts.

In Europe however, ICE saw lower activity, with LIFFE’s global derivatives average daily volume traded of 5.9 million contracts in December 2013 (excluding Bclear), down 6% compared with the same period of 2013.

Deutsche Börse-owned Eurex group saw a minor fall in volume during 2013, down from 2.3 billion contracts traded in 2012 to 2.2 billion. However, this was largely due to a fall in Eurex’s largest segment, equity derivatives, which slumped 15.7% to 644.8 million contracts. But the smaller interest rate derivatives segment saw volumes increase by 8.3% to 509.6 million contracts, while volatility derivatives volume climbed 38% to 7.3 million contracts.

CME Group reported increased business during 2013, with average daily volume up 13% from December 2012 to 10.9 million contracts in December 2013. Volume for the whole of 2013 increased by 10% compared to 2012 to an average of 12.5 million contracts per day. Similar to Eurex, interest rate products performed well, up 38% year-on-year.

Eurodollar options saw the biggest growth among CME products, climbing 142% to an average daily volume of 652,000 contracts.