The number of exchange-traded derivatives (ETD) contracts worldwide decreased by 15% in 2012, the first drop since 2004, according to statistics compiled by the World Federation of Exchanges (WFE).
The WFE, which conducts an annual survey on derivative markets, found that last year, 21 billion derivative contracts (11 billion futures and 10 billion options) were traded on exchanges worldwide compared to 25 billion in 2011.
According to a preliminary report on the survey findings, the drop in equity derivatives (-19%) mirrors the decline in the value of cash equities and is partly explained by the significant decrease in volatility observed in 2012. The decline also reflects a change in size of the KRX (Korea Exchange) KOSPI 200 contracts. When these are excluded from the statistics, the decrease becomes less pronounced (-7.5%).
The volume of interest rate options and futures traded also decreased significantly, showing a 15% drop. The continued low interest rate environment, coupled with anaemic economic growth and minimal credit expansion are cited in the report as possible contributors to this trend.
The biggest decrease in 2012 (-22.5%) was recorded by currency derivatives, though this can be set against significant volume expansion in prior years. Contracts traded in India still account for a large portion of overall volume in currency derivatives (60%). Excluding that market, volumes increased by 3% in 2012.
The only segment experiencing an increase in 2012 was commodities (+19%), partly, but not wholly, explained by mainland Chinese exchanges, which recorded a 34% rise in the number of contracts and accounted for 41% of global volumes in 2012.
The full report will be made available following the annual International Options Market Association (IOMA) conference in Busan, South Korea, from 5-8 May.
Reporting by Richard Schwartz