Tough index derivatives trading hits Deutsche Börse

Reduced demand for European index derivatives has impacted trading on Deutsche Börse’s Eurex exchange, according to the exchange operator’s Q3 report.

Reduced demand for European index derivatives has impacted trading on Deutsche Börse’s Eurex exchange, according to the exchange operator’s Q3 report.

Trading in European equity index derivatives on Eurex fell by 20% in the third quarter compared to the same period last year, with 152 million contracts traded. Index derivatives is the highest volume product group on Eurex and has hit revenues for Deutsche Börse’s derivatives market, which is down 9% to €168.9 million.

The group blamed lower volatility in the European market compared to last year and ongoing caution linked to uncertainty regarding the eurozone economy.

More generally, derivatives were down, though this mirrors trends seen among other European derivatives exchanges including Turquoise and Liffe.

Equity derivative volumes fell 13% year-on-year to 74.7 million contracts, and futures and options trading was down 12% to 346.2 million contracts.

Interest rate derivatives remained stable at 117.7 million contracts, largely due to ongoing demand for hedging given uncertainties over how key interest rates will develop.

Dividend derivatives was one of only two European product ranges to see significant growth, up 18% to 2 million contracts, while volatility index derivatives trading increased 25% to 1.5 million contracts.

The exchange operator also recently announced an index licencing agreement with the Vienna Stock Exchange to enable it to list futures and options based on some of Vienna’s major indices. It hopes this will help compliment its Austrian equity futures and equity options segment, which it said has been successful with 6.8 million contracts traded in the first nine months of the year.

Deutsche Börse saw more positive trends on its Xetra equities exchanges segment, with trading volumes remaining roughly stable at a time when the firm has cut costs, resulting in increased profitability. Xetra trading volumes fell 1% to €256.5 billion in Q3 with the number of transactions rising 3% to 47.6 million trades. However, total trading in the first nine months of the year on Xetra is down by 4% to €807.2 billion.

Deutsche Börse did not detail the effects of its controversial deal to offer block trades from its dark pool, Xetra Mid-Point, to Liquidnet members. However, figures from Thomson Reuters Equity Market Share Reporter suggest volumes on the venue have not recovered since several major brokers pulled their liquidity in response to the deal, though volume in October so far stands at €1.87 million, up from €1.26 million in September.

The firm’s Frankfurt Stock Exchange has struggled however, with trading volume falling 11% once the effects of a terminated joint venture with SIX Swiss Exchange are taken into account.

As such, Deutsche Börse has announced plans to reform the Frankfurt market with a new quality guarantee, in which is promises investors will able able to buy or sell at a price equivalent or better than that on reference market for European and US blue chips and ETFs.