Академический Документы
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Культура Документы
Conducted by WFE
With the help of Didier Davydoff and
Grégoire Naacke
IEM Finance
May 2009
As of May 2009, the members of IOMA / IOCA were:
Every effort has been made to ensure that the information in this survey is accurate at the time of
printing, but the Secretariat cannot accept responsibility for errors or omissions.
International Options Market Association (IOMA)
Table of Contents
Introduction ................................................................................................................................ 4
The industry structure................................................................................................................. 5
The global derivatives market .................................................................................................... 8
Exchange and products trends .................................................................................................. 10
A - Equity products .......................................................................................................... 11
Stock options ......................................................................................................... 13
Stock futures .......................................................................................................... 18
Index options ......................................................................................................... 20
Index futures .......................................................................................................... 25
B – Interest rate products ................................................................................................. 30
STIR options and futures ....................................................................................... 31
LTIR options and futures ...................................................................................... 35
C – Currency products...................................................................................................... 41
D - Commodity derivatives .............................................................................................. 46
Energy derivatives ................................................................................................. 51
Metal derivatives ................................................................................................... 52
Agricultural derivatives ......................................................................................... 52
Gathering statistics on retail trading......................................................................................... 54
OTC trades registered by exchanges ........................................................................................ 55
Prospects for clearing organizations......................................................................................... 57
Conclusion ................................................................................................................................ 59
This report is the result of the annual survey conducted by the World Federation of Exchanges for the
International Options Markets Association (IOMA) derivatives exchanges. This report deals with the
trading of derivatives products, and it covers 51 exchanges. Some of these exchanges trade a wide
range of derivatives contracts, while many specialize in a single area of the market. The survey results
were analyzed into six groups representing underlying assets:
• Single equity
• Equity indices
• Short-term interest rates
• Long-term interest rates
• Currencies
• Commodities
The survey was compiled from questionnaire responses sent by IOMA members, and data from
exchange websites. The authors wish to thank exchanges which responded to the questionnaire, and
especially exchange staff who gave further assistance in response to enquiries.
The report begins with a brief overview of changes to the structure of the industry during 2008. The
section “The Global Derivatives Market” describes the overall developments in derivative volumes.
The section “Exchange and Product Trends” examines volumes and value at each exchange within
each major product type. It shows changes from 2007 for all exchanges. The study ends with
“Concluding Remarks”, which raise further questions for consideration.
The findings of this report were presented by Didier Davydoff at the IOMA/IOCA Annual Conference
held in Frankfurt in April 2009.
In May 2008, BOVESPA Holding and BM&F were integrated into a new corporation named
BM&FBOVESPA SA. Both markets are very complementary: the main strength of BOVESPA
market is its equity option trading, while the most active contracts on BM&F markets are
interest rate and currency derivatives.
In May 2008, TSX Group and Montréal Exchange finished the completion of their business
combination to create TMX Group Inc.
In July 2008, NASDAQ OMX Group completed the acquisition of the Philadelphia Stock
Exchange, expanding the NASDAQ OMX Group’s presence in the derivatives market. The
Philadelphia Stock Exchange is renamed NASDAQ OMX PHLX.
In September 2008, the CME Group completed its acquisition of NYMEX Holdings. We recall
that CME and CBOT had merged to form the CME group in July 2007. In the IOMA survey
2007, we presented statistics relating to the former CME and the former CBOT separately. For
the present 2008 survey, we present aggregate statistics for the whole group: CME + CBOT +
NYMEX. On the whole, 3.1 billion contracts were traded in 2008 on the CME Group markets.
In October 2008, NYSE Euronext completed its acquisition of the American Stock Exchange,
becoming the third-largest US options marketplace. Statistics of the new entity “NYSE Amex”
are presented separately in the present report.
In October 2008, Wiener Börse acquired a stake in the Ljubljana Stock Exchange and the
Budapest Stock Exchange and became the majority owner of the two stock exchanges.
For the first time, statistics of commodities derivatives traded on the German RWX Risk Management
Exchange, the former WTB based in Hanover, are included in the present report. In March 2009,
Eurex expressed its interest in acquiring RWX.
In 2008, several exchanges added a new category of underlyings to their existing range of products.
Symmetrically, some categories of underlyings were dropped from the listings on some exchanges or
were no longer traded.
On average, exchanges offer four different product lines (excluding exotic products). NYSE Liffe
(European markets) and the Australian Securities Exchange have the most diversified offer (11
different product lines) while nine exchanges offer one product line only.
Among exchanges that have answered the question relating to their prospects for listing new products,
12 said they do plan on offering new products outside of their current asset classes during 2009 and
10 said they do not.
Most frequently cited classes of products are exotic derivatives, such as carbon options on the Hong
Kong exchanges, or credit options and new volatility futures on CBOE.
The Australian Securities Exchange, TAIFEX and Eurex have the most numerous projects, each of
them planning to offer new products in six asset classes in 2009. For example, Eurex intends to
launch commodity index futures, and options and futures on energy. Eurex also launched the first
property futures in February 2009, based on the IPD UK annual All Property Index.
The London Stock Exchange intends to list exchange traded contracts for Difference on the FTSE100
equity underlyings.
0 1 2 3 4 5 6 7 8 9 10 11 12
17 billion derivative contracts were transacted in 2008 on exchanges worldwide (7.8 billion futures and
9.3 billion options). These figures are apparently positive as they represent a new historic record.
However, we will show below that these figures hide wide disparities between products and between
the first three quarters of the year and the last quarter, Lehman Brothers’ collapse marking a profound
break in the activity of the derivatives markets
Options
Futures
12 2004
10
2005
8
2006
6
2007
4
2008
2
0
Options Futures Total
The global activity of derivatives exchanges is heavily influenced by the weight of the Korea Exchange
in equity index options trading. When KOSPI 200 options traded on the Korean market are excluded
from statistics, the growth rate of options trades is the weakest since 2003.
In 2008, the growth rate in the volume of equity derivatives was more than halved compared to
2007, even if KOSPI 200 options are taken into account or not.
For the first time since 2003, negative growth rates were observed on all groups of interest rate
products.
The growth rate of currency derivatives was ten times lower compared to 2007.
Commodity derivatives, driven by Chinese markets, seem to be the only segment that has not been
affected by the financial crisis.
10 Currency 1,5
8 Commodity 1,2
6 0,9
4 0,6
2 0,3
0 0,0
2002 2003 2004 2005 2006 2007 2008
In 2008, equity products accounted for 69% of all derivatives contracts in terms of the number of
contracts traded.
Equity derivatives developed in a period of historical volatility on the underlying cash markets. During
the third quarter of 2008, the level of volatility was the highest observed since 1929. At the beginning
of 2009, the volatility remained high but at levels that had already been observed in the past (in
August 2002 for example).
80%
60%
40%
20%
0%
Feb-05 May-05 Aug-05 Nov-05 Feb-06 May-06 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09
The growth rate of volume was half as compared to the previous year for all equity products except for
index futures. For index futures it decreased by 12% (34% in 2008 against 46% in 2007)
Futures
2,5
2,0 1,0
1,5
1,0 0,5
0,5
0,0 0,0
2002 2003 2004 2005 2006 2007 2008
As already noted in last year’s IOMA derivatives market survey, the size of the contracts traded shows
that retail investors play a greater role in single stock derivative trading than they do in stock index
trading.
Average notional value of contracts decreased for all types of equity products in 2008, in proportion to
the fall of equity prices.
OTC trading in equity-linked derivatives is still much less significant than on other derivatives
segments. Equity-linked derivatives accounted for only 1.5% of the total OTC derivatives outstanding
on all underlying products at the end of June 2008 against 1.7% at the end of June 2007.
Except American equities forwards and swaps, all segments of OTC equity-linked markets increased
between June 2007 and June 2008. As already noted in last year’s IOMA derivatives market survey, it
is worth noting that OTC trading of equity derivatives is more significant in Europe than in other
regions, relatively to the size of organised markets.
Stock options
In 2008, the growth rate of trading volumes was still very high, although it was half as compared to the
exceptional year of 2007 (17% against 34%). However, the contrast is striking between the growth rate
of the first three quarters and year-end, and between the growth rates across countries. Before the
announcement of Lehman Brothers’s bankruptcy, the volumes were already on a path of slower
growth than in 2007, especially in Europe. They soared in September, but then slumped on all
Asian/Pacific exchanges from October and in other regions in November. To date they have failed to
show an upturn.
60% Americas
Asia - Pacific
50%
Europe - Africa - Middle East
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
The United States continue to dominate the stock options market with the four most active exchanges
in the world (ISE, CBOE, NASDAQ OMX PHLX and NYSE Arca Options). Trading on individual
equities and especially ETFs has continued to grow rapidly. 300 millions options on ETFs were traded
on ISE (+62%) and 330 millions on CBOE. At the same time, data available from CBOE shows that
the open position at the end of the year remained stable, which implies an increase in the velocity of
trading for these contracts, probably due to the development of programme trading. On average, the
open position in options on ETFs rotated in 1.6 months against 2.5 months in 2005. Options on ETFs
tend to become substitutable trading tools to index options. For instance, the 97 millions options on
S&P 500 ETF traded in 2008 on CBOE (many of them emanating from electronic algorithmic trading
by hedge funds) represented an increase of 97% over 2007, while volumes of S&P 500 index options
traded on the same exchange grew by “only” 13%.
An additional trend in 2008 was the rise of options on sector ETFs. The options on the financial sector
SPDR became the third most active option on ETFs on CBOE (25.9 million traded options, i.e. almost
four times more than in 2007). In June 2008, options were launched on the SPDR Gold Trust ETF, an
ETF holding physical gold listed on the NYSE and which is one of the biggest ETFs in the United
States in terms of assets under management.
In South America, BM&FBOVESPA declined slightly but Petrobas PN options remain the most actively
traded stock options in the world with 210 million contracts traded in 2008 against 279 million in 2007.
Stock option trading in Asia-Pacific is still dominated by Hong Kong Exchanges & Clearing, despite a
very severe downturn after the Lehman bankruptcy. The National Stock Exchange of India and Osaka
Stock Exchange increased their volumes by approximately one fifth, but ASX, TAIFEX and Tokyo
Stock Exchange declined.
NB: Notional values are not available for the Boston Options Exchange, Buenos Aires Stock Exchange, ISE, NASDAQ OMX Nordic Exchanges,
NYSE Arca Options, Osaka Stock Exchange and Tokyo Stock Exchange.
2 500
Millions
2 000
1 500
1 000
500
0
Americas Asia Pacific Europe, Africa, Middle
East
In 2008, the stock futures market continued to grow more rapidly than other segments of the
derivatives market. The annual growth rate in 2008 was 66% after having doubled in 2007.
This market remains located in the Europe-Africa region and in the Asia-Pacific region. In North
America the only exchange proposing this class of products for trading is OneChicago where trading
fell by a half in 2008 compared to 2007.
Johannesburg Stock Exchange retained its leading position in terms of number of contracts traded.
Eurex became the third most active exchange in the world in terms of traded volumes, and the second
one in terms of notional value exchanged. NYSE Liffe was again very successful in attracting OTC
trades in stock futures to its OTC registration system BClear. MEFF and NASDAQ OMX Nordic
Exchanges also experienced very rapid growth.
In Asia, the National Stock Exchange of India remains the most active exchange in the world in terms
of notional value while other exchanges are developing rapidly. The case of the Australian Securities
Exchange is especially impressive, where volumes quadrupled, thus propelling it to become the fifth
largest exchange in the world for this group of products. A new player appeared in May, the Korea
Exchange, which already recorded 12 million contracts in 8 months.
80%
60%
40%
20%
0%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
-20%
-125% -100% -75% -50% -25% 0% 25% 50% 75% 100% 125% 150%
Warsaw SE 190,9%
MEFF 117,1%
Johannesburg SE 58,6%
Budapest SE -23,9%
Other Ex. 13
Other Ex. 7
2007
2007
Korea Exchange 0
Korea Exchange 2008 6
2008
Athens Derivatives Ex. 7
NASDAQ OMX Nordic 6
Exchanges
Budapest SE 13
7
MEFF
Borsa Italiana 63
32
Australian SE (2)
Johannesburg SE 50
42
NYSE Liffe (European
markets) 56
MEFF 90
Eurex (1) NYSE Liffe (European 382
markets) 501
National Stock Exchange of
India 234
Eurex (1) 628
700 2007
2008
600
500
Millions
400
300
200
100
0
Americas Asia Pacific Europe, Africa, Middle East
Index options
The index options market had a very mixed year in 2008 and early 2009. After an extraordinary year in
2007 (+38% excluding figures for Korea), the market grew again although at a slower pace in Europe.
It declined slightly in the Americas and in Asia over the first eight months, before Lehman Brothers’
bankruptcy. The sharp increase in market volatility translated into exceptional volumes of trading in
September and October. However, the liquidity crisis of the interbank market dried up the market at
year’s end and in February 2009 volumes were still lower than in the previous year, except in Asia.
80% Asia/Pacific
Europe/Africa/Mid. East
60%
40%
20%
0%
-20%
-40%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
In total over the year 2008, exchanged volumes increased by 9%, all regions included. As in previous
years, the weight of Korea is still predominant, although it declined slightly from 72% to 68%.
Excluding figures for Korea, the annual growth amounted to 27%. KOSPI 200 options volumes rose
2% in 2008 (against 12% in 2007) and reached 2 766 million contracts.
In Europe, Eurex remained the most active exchange by far. Its flagship product, the Dow Jones Euro
STOXX 50 options, has remained on a strong upward trend, with 401 million contracts traded, an
increase of 59%, following rises of 68% in 2007 and +65% in 2006. Other contributors to the growth of
the exchange were the 105 million traded DAX options (+14%) and the European sectoral index
options (2 million contracts, +61%).
In Europe, MEFF also had a very active year on the mini IBEX options (+46%). On NYSE Liffe, the
picture was mixed: the FT100 index options became the first index option contract traded on this
exchange (29 million contracts, +23% over 2007) ahead of the Dutch AEX and the French CAC 40
which decreased slightly. All other exchanges in the Europe, Africa and Middle East region recorded
lower volumes of trading in 2008 than in 2007. However, the Tel Aviv Stock Exchange, with 81 million
contracts, retained its sixth position worldwide.
In the Americas, trading in index options stabilised or decreased slightly in 2008, except during the
months of September and October. In February 2009, trading volumes were still lower than the
previous year. However, the exceptional activity of September and October allowed most North
American exchanges (except NYSE Amex) to record a positive growth in 2008 over 2007. Moreover,
In the Asia Pacific region, the most remarkable trend, apart from the performance of the KOSPI
options already mentioned, is the rise of the National Stock Exchange of India, whose business on
index options almost tripled for the second successive year and reached 150 million contracts traded.
With 98 million contracts, TAIFEX confirms its third position in that region. The Nikkei 225 options
traded on the Osaka Securities Exchange grew 10% and the number of trades on that contract
increased markedly, up 71%. In the first two months of 2009, trading in Nikkei 225 options slowed
down.
Overall, the concentration of index option trading on main underlying indexes increased again: the top
ten index options after KOSPI 200 options accounted for 87% of the global index options trading in
2008 (excluding the KOSPI index) against 82% in 2007.
Osaka SE 29
32 Tel Aviv SE
CME Group 41
44
NYSE Liffe (European markets)
NYSE Liffe (European markets) 63
67
Tel Aviv SE 94
81 CME Group
TAIFEX 97
98
2
Eurex
National Stock Exchange of India 53
151
CBOE 231
259 CBOE
Eurex 353
515
63.3 Tril
2710 Korea Exchange
Korea Exchange 42.7 Tril
2766
NB: Notional values are not available for the BMF&BOVESPA, ICE Futures US, ISE, Osaka Stock Exchange and Singapore Exchange.
2007 2008
3 000
2 500
2 000
Millions
1 500
1 000
500
0
Americas Asia Pacif ic Asia Pacif ic Excl. Korea Europe, Af rica, Middle East
Index futures
The growth of index futures trading decreased in 2008, but less markedly than for other equity
derivatives. For the whole year the annual growth rate of the number of contracts traded amounted to
34%, in contrast to 45% in 2007 and 32% in 2006. Trading in index futures continued to grow very
rapidly until October 2008, especially in the Americas and in Asia-Pacific. It remained vibrant in Asia
until the end of the year. But from November 2008, the growth of trading was interrupted on a majority
of exchanges.
Americas
100%
Asia - Pacific
80% Europe - Africa - Middle East
60%
40%
20%
0%
-20%
-40%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
In the United States, the merger of CME and CBOT has further strengthened the dominant position of
the first actor, the CME Group, with a market share of 95% in the United States and 39% in the world.
ICE Futures US, the second exchange offering index futures in the United States attained a market
share of 2% in the United States. Other exchanges in the Americas recorded mixed figures, with
OneChicago, Montréal Exchange and Mexder growing, while BM&FBOVESPA suffered a 24%
decrease in trading.
In Europe, Eurex again increased its market share, thanks to the Dow Jones Euro STOXX 50 futures
which accounted for 85% of the recorded volumes on that exchange. Futures on the SMI also grew
significantly, while the DAX future declined slightly. Some sectoral indices have also shown increased
trading. For example, the Dow Jones STOXX 600 Banks Future ranks as the fourth most actively
traded contract on Eurex.
The second most active exchange in the region, namely NYSE Liffe, increased 14%. The most active
contract remains the CAC 40, but the most significant progression is observed on the FTSE 100.
Contracts on the BEL 20 and the AEX indices were stable, while the Portuguese PSI declined. It is
interesting to note that the number of trades is increasing faster than the number of contracts traded,
pushed up by automatic trading. For example, the number of trades on the FTSE100 increased 82%
whereas the number of traded contracts increased 26%. The average number of contracts per trade
obviously diminished correlatively. In 2008 each trade was based on 1.6 contracts on the AEX, on
average, and 2.3 contracts on the FTSE 100 and the CAC 40.
In Asia, The National Stock Exchange of India (NSEI) continues to be very successful with a number
of contracts traded that rose 46% and a number of trades that almost doubled over 2007. In contrast,
activity on the Bombay Stock exchange diminished and is only marginal when compared to the NSEI.
The Osaka Securities Exchange recorded a strong increase (+65%) in the number of contracts traded
and in the number of trades which doubled over the year. This trend is mainly due to the Nikkei 225
Mini, a contract for which retail trading represents as much as 39% of total trading. Again in 2009, the
Nikkei 225 Mini has grown significantly, while the Nikkei 225 (for which retail trading accounts for 13%)
registered a significant slowdown in January and February.
TAIFEX, the Thailand Futures Exchange (TFEX) and the Singapore Exchange were among the
exchanges with the highest speed of growth for index futures trading in the world. In Korea, futures on
the KOSPI 200 are not as predominant as options on the global derivatives landscape, but they grew
by almost 40% over 2007.
On the Hong Kong Exchanges and Clearing, traded contracts increased 37%, while the number of
trades increased 54%. It should be noted that the strongest increase recorded was for the Mini Hang
Seng index future, a contract predominantly traded by retail investors.
Other Ex.
Other Ex. 2007
2007
Johannesburg SE
ICE Futures U.S. 2008
2008
Johannesburg SE BM&FBOVESPA
Australian SE TAIFEX
TAIFEX
Borsa Italiana
NASDAQ OMX Nordic Exchanges
MEFF
Turkish Derivatives Exchange
Australian SE
Hong Kong Exchange
Tokyo Stock Exchange Group
Singapore Exchange
Eurex
Eurex
CME Group
CME Group
Millions 0 200 400 600 800
USD trillions 0 10 20 30 40 50 60
NB: Notional values are not available for ICE Futures U.S., NASDAQ OMX Nordic Exchanges, OneChicago and Singapore
Exchange.
800
700
600
Millions
500
400
300
200
100
0
Americas Asia Pacific Europe, Africa, Middle East
Trading in all types of interest rate products diminished in 2008, especially in futures.
Overall, traded volumes are down 14%, the largest decline being on short term interest rate
futures (-18%), but this is largely due to a specific event on Mexder where a short term interest
rate contract has been replaced by a long term one. Regardless of Mexder, the trend on long
term interest rate futures would be less negative (-9%) than on other contracts. Long term interest
rate futures decline is in line with the overall trend of interest rate products (-14%), while options
are a little less affected (- 6% for short term and -9% for long term products).
Options
0,8 0,4
0,6 0,3
0,4 0,2
0,2 0,1
0,0 0,0
2002 2003 2004 2005 2006 2007 2008
The global volume recorded fell 6% for STIR option trading and 18% for futures in 2008.
The global concentration of markets remained extremely strong in 2008. 95% of options were traded
on the CME Group or NYSE Liffe, while the market share of those two markets on futures rose from
64% to 76%.
On NYSE Liffe, all options grew strongly, the Euribor (+44%) more than the Three Month Sterling. The
Three Month Sterling Mid Curve tripled and reached 12 million contracts traded. As for futures, a
decline was observed on the Three Month EuroSterling and the Three Month EuroSwiss options, while
Euribor futures were stable compared to 2007.
With regards to the CME Group, most trading is concentrated on the Eurodollar futures which remain
the most active STIR contract in the world (597 million contracts) despite a slight decrease in 2008.
Eurodollar options are also the most active STIR options globally, but a sharp decrease of 27% was
recorded in 2008.
In the Americas, the sharp decrease in the number of futures traded on Mexder is due to the
introduction at end of 2007 of a substitutable long term interest rate product, the 10-year interest rate
swap future (see below).
Both STIR options and futures are also traded on BM&FBOVESPA and Bourse de Montréal and they
were generally less active in 2008 than in 2007, except for options on BM&FBOVESPA.
All other exchanges where STIR options are traded declined except on NASDAQ OMX where 17
million futures were traded.
BM&FBOVESPA 49,5%
Australian SE -62,9%
CBOE -71,8%
Other Exchanges 2
0,655
1 2007 Australian SE 2007
0,241
1 2008 2008
NASDAQ OMX Nordic Exchanges
1
0,703
Montréal Exchange
Tokyo Financial Exchange Inc. 4 0,263
1
14 313
BM&FBOVESPA
21 CME Group
229
NB: Notional values are not available for CBOT, OMX, Singapore Exchange and Tokyo Financial Exchange for 2006.
250
Millions
200
150
100
50
-
Americas Asia Pacific Europe, Africa, Middle East
b) STIR futures
TAIFEX
Eurex -11%
Australian SE -12%
BM&FBOVESPA -25%
MexDer -72%
14,3
Montréal Exchange
9,3
MexDer
28,4
Australian SE
BM&FBOVESPA 24,1
625,7
CME Group CME Group
598,9
Millions 0 100 200 300 400 500 600 USD trillions0 200 400 600
NB: Notional values are not available for NASDAQ OMX Nordic Exchanges, Singapore Exchange and Tokyo Financial
Exchange.
800
600
400
200
-
Americas Asia Pacific Europe, Africa, Middle East
As for short term interest rate derivatives, the trading of long term interest rate derivatives declined in
2008. Both options and futures volumes diminished, often dramatically, in the three regions.
Europe and Americas had resisted until Lehman Brother’s collapse. But the growth stopped suddenly
in September 2008. It became negative in October in Americas and in December in Europe.
60% Americas
Europe/Africa/Mid. East
40%
20%
0%
-20%
-40%
-60%
-80%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
As far as bond futures are concerned, the picture is even worse. All regions were already on a
negative trend before the crisis, in Europe less than in other regions, but then volumes collapsed
everywhere, including in Europe as a consequence of the inter-bank liquidity crisis.
0%
-10%
-20%
-30%
-40%
-50%
-60%
-70%
Americas
-80%
Asia - Pacific
-90% Europe/Afr./ME
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
Despite the decline in their activity, Eurex and CME Group still hold an overwhelming market share for
long term interest rate (LTIR) derivatives trading globally, amounting to 98% for options and 91% for
futures. The Euro-Bund futures on Eurex and the 10 year treasury note futures on CME keep their
leading position globally with an equivalent number of 257 million contracts being traded in each of
those contracts. In terms of notional value, options trading is even more concentrated, with CME
Group alone representing 81% of the global total.
Options traded declined 12% on Eurex and 12% on the CBOT list of CME Group, while futures
declined 15% and 13% respectively.
In the Americas, LTIR options are also traded on the Montréal Exchange, the Buenos Aires Stock
Exchange and CBOE. As in 2007, volumes increased in 2008 in Montréal Exchange. They decreased
on CBOE. As far as LTIR futures are concerned, volumes traded on other exchanges in the Americas
decreased in Montréal and on BM&FBOVESPA and increased sharply on MexDer.
The number of Mexder LTIR contracts traded more than doubled and the notional value of the
contracts tripled. This trend can be explained by the confirmed success of the 10-year bond (M10)
futures and by the introduction at end of 2007 of a new 10-year interest rate swap future which is a
substitute for the 120 maturities that institutional investors and market makers in the 28-days TIIE
futures had to roll (a transaction called “Engrapado” or Bundle). The launch of the swap futures
allowed for a reduction in the time-consuming use by the back office of market participants of the daily
settlement price on each maturity.
In the Asia-Pacific region, only two exchanges list LTIR options, namely the Tokyo Stock Exchange
and the Australian Securities Exchange: both of them saw volumes decrease in 2008. As for futures,
volumes traded declined sharply on the Australian exchange, but they rose on the Korea exchange,
which is now the second most active exchange on this category of products in Asia, behind ASX.
Volumes declined in Singapore and on the Tokyo Stock Exchange.
Johannesburg SE
Eurex -12%
Australian SE -39%
CBOE -65%
2,1
Australian SE 2007 0,2
1,3 Australian SE 2007
0,1
2008 2008
2,8
Tokyo Stock Exchange Group
2,4
11,9
Eurex
11,1
79
Eurex
69
49,9
105 CME Group
CME Group 46,7
98
NB: Notional values are not available for Buenos Aires Stock Exchange and Tokyo Stock Exchange.
60
40
20
0
Americas Asia Pacific Europe, Africa, Middle East
b) LTIR Futures
Johannesburg SE 2240%
TAIFEX 212%
MexDer 159%
MEFF 8%
BM&FBOVESPA -11%
Eurex -15%
Australian SE -25%
Warsaw SE -100%
NB: Notional values are not available for Bursa Malaysia, Singapore Exchange, and NASDAQ OMX Nordic Exchanges.
500
Millions
400
300
200
100
0
Americas Asia Pacific Europe, Africa, Middle East
Currency derivatives remain a relatively small segment of organised derivatives markets. Their growth
slowed down in 2008 as compared to previous years but it was still rapid on the option segment
(+17%) and more moderate on futures (+4%).
Currency
0,4 options 0,04
Options
Futures
0,3 0,03
0,2 0,02
0,1 0,01
0,0 0,00
2002 2003 2004 2005 2006 2007 2008
a) Currency options
The growth of the currency options volumes slowed down from 79% in 2007 to 17% in 2008. However,
these figures are heavily influenced by BM&FBOVESPA, the leading exchange in the world for this
category of products in terms of contract volume (the main product being U.S. Dollar options on
futures traded on BM&F markets). BM&FBOVESPA volumes rose 24% in 2008 but they had doubled
in 2007.
A surge in options trading has been observed on all exchanges in the United States: ISE, ICE Futures
and CME Group. Although the CME Group is still predominant in the US, ISE has been very
successful for its second year in trading currency options, with a growth rate of 141%.
In the Europe-Africa-Middle East region the most active exchange is the Tel Aviv Stock Exchange,
with 5,6 million contracts traded in 2008, an increase of 1,3 million over 2007. NYSE Liffe (European
markets) and Budapest Stock Exchange experienced declining activity in 2008.
BM&FBOVESPA 24%
Budapest SE -28%
MexDer -30%
24,7 596,1
BM&FBOVESPA CME Group
30.6 850.9
NB: Notional values are not available for BM&FBOVESPA, ICE Futures U.S. and International Securities Exchange (ISE).
20
15
10
5
0
Americas Europe, Africa, Middle East
b) Currency futures
Currency futures trading increased in 2008 for a majority of exchanges. The CME Group continues to
retain its dominant position on a global scale, even more in terms of notional value than of contract
volumes. In South America, both markets present in this segment – MexDer and BM&FBOVESPA -
were stable as compared to 2007. BM&FBOVESPA has retained its second position worldwide.
In Asia, the Tokyo Stock Exchange performed very well, with 43 million contracts traded. A newcomer,
the National Stock Exchange of India was able to record as much as 11 million contracts for its first
year of trading in this segment of the market. But the Korea Exchange is still much bigger in terms of
notional value traded. The Australian Securities Exchange is progressing rapidly.
Currency futures are less actively traded on organised exchanges in the Europe, Africa, and Middle
East region than in the other two. However volumes surged on some exchanges: in Warsaw, they
increased from 6 000 contracts in 2007 to 133 000 in 2008, despite a fall in liquidity at the end of the
year and market makers spreads three times wider at the end of the year than in September 2008.
The Turkish Derivatives Exchange increased its activity 80%, but the Budapest Stock Exchange
decreased 32%.
Warsaw SE 2073%
CME Group 9%
MexDer 0%
BM&FBOVESPA -1%
Budapest SE -32%
ALL EXCHANGES 4%
(1) Including currency CFDs (2) Exchange Forex Margin contracts (Click 365)
18
Budapest SE 2007
Korea Exchange 2007 12
8
National Stock Exchange of Turkish Derivatives Exchange
15
India
32
Turkish Derivatives Exchange MexDer
33
313
Tokyo Financial Exchange (2) Korea Exchange
347
BM&FBOVESPA 4 289
BM&FBOVESPA
4 322
NB: Notional values are not available for ICE Futures U.S. (formerly NYBOT), Rofex and Philadelphia Stock Exchange.
250
2007 2008
200
Millions
150
100
50
0
Americas Asia Pacific Europe, Africa, Middle East
Commodity derivatives is the only segment of the market which continued its very rapid growth,
especially in the futures market (+ 38% in 2008 against 19% in 2007). In this class of underlyings,
futures are much more actively traded (1,5 billion contracts traded in 2008) than options (154 million
contracts).
0,4 0,04
Options
Futures
0,3 0,03
0,2 0,02
0,1 0,01
0,0 0,00
2002 2003 2004 2005 2006 2007 2008
a) Commodity options
Commodity options are predominantly traded in the Americas, with the CME Group leading the global
scene for trading those products, followed by ICE Futures US, which is growing rapidly (+33%). In
South America, agricultural options are traded on BM&FBOVESPA and Mercado a Término de
Buenos Aires.
In Europe, the most active exchanges are the London Metal Exchange, with a stable activity in 2008
and NYSE Liffe followed by Johannesburg Stock Exchange and ICE Futures Europe.
In Asia-Pacific, there is only one exchange where commodity options are traded namely the Australian
Stock Exchange, whose activity more than doubled in 2008.
Australian SE 139%
BM&FBOVESPA 74%
Johannesburg SE 8%
Budapest SE -33%
0,3
BM&FBOVESPA
0,5 2007
2007
0,8
0,3 Johannesburg SE
ICE Futures Europe 1,0 2008
0,6 2008
0,7
Johannesburg SE
0,7
Mercado a Término de Buenos 2,4
Aires 1,4 0,5
NYSE Liffe (European markets)
1,3 1,1
NYSE Liffe (European markets)
1,5
7,2
London Metal Exchange
7,4
13,0
ICE Futures U.S. 1,6
17,2 Australian SE
3,7
106,9
CME Group
124,4
NB: Notional values are not available for ROFEX, BM&FBOVESPA, CME Group, ICE Futures U.S., ICE Futures Canada,
Mercado a Término de Buenos Aires, ICE Futures Europe and London Metal Exchange
160
143,51
140
122,56
2007 2008
120
100
Millions
80
60
40
20 9,44 10,17
0,00 0,01
0
Americas Asia Pacific Europe, Africa, Middle East
CME Group is still the most active market in the world for trading of commodity futures following the
acquisition of NYMEX and CBOT, but the growth of the market was driven by three major Chinese
exchanges: Dalian Commodity Exchange, Zhengzhou Commodity Exchange and Shanghai Futures
Exchange. For the first time, the Asia-Pacific region was the most active of the three regions for
trading commodity futures. Chinese markets are mainly focused on agricultural derivatives. But other
Asian exchanges have also emerged as major markets for metal derivatives. For example, the gold
futures contract traded on TAIFEX since December 2007 surged to more than 5 million in 2008,
representing a notional value worth nearly 60 billion dollars.
In Europe, ICE Futures Europe and the London Metal Exchange continued to grow rapidly whilst the
activity on NYSE Liffe remained stable.
NB: Notional values are not available for Bursa Malaysia, Central Japan Commodity Exchange, CME Group, Dalian Commodity
Exchange, ICE Futures Canada, ICE Futures Europe, ICE Futures U.S., London Metal Exchange, Mercado a Término de
Buenos Aires, RMX, ROFEX, Shanghai Futures Exchange, Singapore Exchange, Tokyo Grain Exchange and Zhengzhou
Commodity Exchange.
400
300
200
100
0
Americas Asia Pacific Europe, Africa, Middle East
As in previous years, most energy derivatives trading is concentrated on two exchanges, ICE Futures
and CME Group, following its acquisition of NYMEX.
Most active contracts are oil futures, traded on the two leading markets.
Energy derivatives are an example of successful registration and clearing of OTC trades by organised
markets and clearing houses. In 2008, 85 million derivatives registered on NYMEX were cleared via
Clearport (against 66 million in 2007).
European style natural gas options CME Group (Nymex*) 31.2 29.9
European style crude oil options CME Group (Nymex*) 3.6 1.9
Crude oil average price options CME Group (Nymex*) 2.2 1.4
Henry hub natural gas swap futures CME Group (Nymex*) 31.4 16.2
Henry hub penultimate swap futures CME Group (Nymex*) 12.4 10.1
The metal derivatives market was very dynamic in 2008. Gold derivatives were especially actively
traded on the electronic platform Globex of CME Group (NYMEX) and in Asia (in Shanghaï and in
Taïwan as already mentioned)
Among exchanges that gained a higher ranking in the list of most actively traded contracts, the
Shanghai Futures Exchange’s gold and copper contracts rose to fourth and fifth positions respectively.
Source: The Futures Industry Association - * Began trading gold futures in January 2008.
Agricultural derivatives
Agricultural derivatives are the most actively traded commodity derivatives and it was also the most
dynamic market in 2008 with a growth rate of 38.7%, which was slightly higher than the growth rate of
metal derivatives.
Two products, namely white sugar futures traded on ZCE and soybean futures traded on DCE,
experienced an impressive surge of their volumes in 2008 thereby placing them respectively first and
second for the most actively traded agricultural derivatives.
As already mentioned in previous IOMA derivatives surveys, agricultural derivatives markets remain
less developed in Europe than in the Americas and Asia as the Common Agricultural Policy protects
producers against price falls.
Like last year, exchanges were asked about the share of retail investors in trading activity. The table
below summarizes answers received. Very few changes were observed compared to 2007. Equity and
index options are usually traded more by private investors than futures. However, several exchanges
(MEFF, Singapore Exchange and Osaka Stock Exchange) succeeded in attracting significant interest
from retail investors in futures contracts.
Eurex processed 857 million contracts on its wholesale trading facilities in 2008 (+44% over 2007).
Index options are the main segment of this market, stock futures recorded the strongest increase in
2008 (2.5 times more than in 2007).
In 2008, the OTC service of Bclear of NYSE Liffe processed 190 million contracts an annual increase
by 55% over 2007. Stock futures registered on Bclear grew the fastest and accounted for 120.9 million
contracts, representing 97% of the overall trading volumes in stock futures on Liffe. In December 2008
Liffe broadened the range of products eligible to Bclear by adding CDSs on European indexes.
In Europe, MEFF also recorded a very rapid growth of its OTC processing services, especially on
individual stock futures (+163%) and options (+43%).
In Asia, OTC trades processed by Hong Kong Exchanges and Clearing increased on stock options
and stock index futures but they decreased on index options.
In the Americas, BM&F markets processed more than 2 million OTC swaps as in 2007.
For the second year running data was gathered from clearing organizations.
In the Americas, the Options Clearing Corporation (OCC) is the world's largest equity derivatives
clearing organization. OCC's participant exchanges include: the Boston Options Exchange, Chicago
Board Options Exchange, International Securities Exchange, NASDAQ OMX PHLX, NYSE Amex and
NYSE Arca.
In Europe-Africa-Middle East region, the two largest clearing corporations are Eurex and LCH
Clearnet. Eurex clearing house is clearing Eurex on-exchange trades but also an important part of
OTC trades. LCH Clearnet is mostly responsible for clearing Liffe’s trades on-exchange and OTC
trades via Bclear. The other stock exchanges have their own clearing house that clears 100% of the
trades on-exchange.
In the Asia-Pacific region, all the stock exchanges have their own clearing house that clears 100% of
the trades on-exchange.
The Lehman Brothers bankruptcy and the financial crisis generated an increased interest of market
participants and regulators for centralized clearing of OTC trades, so as to increase market
transparency and capital efficiency thanks to position netting and to reduce counterparty and systemic
risks. A major area for this development is the CDS market, which is still dependent upon email and
voice channels and suffers from very frequent errors (13% of CDS trades according to ISDA).
Following pressure from the European Commission, nine international banks committed to clear a
Euro area-based clearing facility for their OTC trades. In December 2008, NYSE Liffe added CDSs to
the range of products that can be registered on its OTC service, Bclear, and cleared by LCH.Clearnet
London. NYSE Liffe CDS contracts are based on Markit iTraxx Europe indexes. LCH.Clearnet in Paris
also announced plans to launch clearing of Euro area CDS and Eurex announced initiative to include
CDS in their clearing offer. In March 2009, ISDA announced a standardisation of CDS contracts that
should facilitate the clearing process.
In March 2009, ICE Trust, a subsidiary of IntercontinentalExchange (ICE), began to clear CDSs,
starting with the North American Markit CDX indexes, single-name CDSs being expected in the
following months. ICE Trust offer is based on the expertise of Creditex, an interdealer broker, it
acquired recently. Its membership is open to buy-side and sell-side institutions. In March 2009, ICE
Trust cleared 600 index CDS trades for a notional amount of 70 billion dollars.
1000
LCH Clearnet (Liffe OTC BClear)
800
LCH Clearnet (Liffe on-exchange)
600
0
2007 2008
5000
Others (100% cleared home)
4000
3000
2000
The Options Clearing Corporation
1000
0
2007 2008
After several years of rapid growth, the pace of development of all derivative markets segments,
except commodity futures, slowed down in 2008. It turned negative on interest rate products.
Commo-
2008 Single Stock Stock Index STIR LTIR Currency
dities
Millions of contracts Options 4 368 4 077 439 171 50 154
traded Futures 1 059 2 286 1 243 1 322 332 1 545
Commo-
2007 Single Stock Stock Index STIR LTIR Currency
dities
Millions of contracts Options 3 729 3 745 469 188 43 132
traded Futures 638 1 706 1 522 1 530 320 1 121
Although a sharp downturn has been observed since Lehman Brothers collapse, equity products are
resisting, and their share in total derivatives trading increased from 65% to 69%.
For the first time trading in equity options has exceeded trading in equity index options. However,
the financial crisis was still producing its negative effects at the beginning of 2009 and growth
seems to be at least provisionally frozen on a majority of exchanges.
Index options and futures were also hit by the financial crisis. However, a huge increase in KOSPI
index options was observed in February 2009: more than 200 million contracts were traded
during that month alone (against 140 million in February 2008).
The fledgling market of equity futures again showed a very impressive rate of growth and there
were again new exchanges that introduced equity futures trading in Asia.
Growth of all segments of interest rate derivatives turned negative, short term like long term
products, options like futures.
The growth of currency derivatives had been exceptional in 2007. It remained strong but slowed
down in 2008. However, it should be noted that the pace of growth of currency options did not
weaken in 2008.
The growth of commodity derivative markets, driven by Chinese markets, seems to be the only one
that has not been affected by the financial crisis.
Finally, we think that the year 2008 can hardly be discussed without distinguishing the trends before
and after worsening of the crisis triggered by Lehman Brothers’ collapse. The period that began in the
fourth quarter of 2008 is characterized by a very marked decline in liquidity. Due to increased volatility
and regulatory restrictions on short selling, spreads quoted by market makers increased while, in
some cases, some market makers were unable to fulfill their obligations. For example, spreads on
individual equity options increased 40% on average compared to the third quarter of 2008, and by
about 100% compared to the fourth quarter of 2007 in the US. Simultaneously, the depth of order
book diminished everywhere.
Trading volumes fell to levels lower than the same period of 2008, while their growth had been
continuous throughout all the previous years. First releases relating to March 2009 volumes indicate
that derivatives volumes are still significantly lower than in March 2008.
by Didier Davydoff
and Grégoire Naacke
IEM Finance
May 2009
As of May 2009, the members of IOMA / IOCA were:
Every effort has been made to ensure that the information in this survey is accurate at the time of
printing, but the Secretariat cannot accept responsibility for errors or omissions.
International Options Market Association (IOMA)
Table of Contents
Introduction ................................................................................................................................ 4
General trends in derivative trading ........................................................................................... 5
A- General growth........................................................................................................ 5
B - Contribution of new exchanges ................................................................................ 6
C - Regional developments .......................................................................................... 8
On-exchange derivative trading v. cash equity ........................................................................ 15
On-exchange derivative trading v. OTC trading ...................................................................... 18
Key characteristics of the industry ........................................................................................... 20
A - Electronic trading v. outcry.................................................................................. 20
B - Membership ......................................................................................................... 21
Conclusion ................................................................................................................................ 23
Each year, the World Federation of Exchanges collects data from derivative exchanges for the
International Options Markets Association (IOMA) and the annual IOMA survey analyses details of the
latest developments in trading activity. The present paper aims at presenting a broader view of general
trends in the industry over the last 10 years.
Even though trading volumes established or even diminished in the last quarter of 2008, the
tremendous growth of derivative exchanges remain the most striking characteristic of the last ten
years. In order to understand the factors behind such growth, it is useful to compare derivative
exchanges with two neighboring markets: underlying cash markets and OTC derivative markets. We
will then try to isolate the different components of growth. Finally we will analyse some key
developments within the industry relating to trading systems (outcry versus electronic) and the
membership of markets.
A- General growth
All groups of products (defined by their underlyings) showed an increase in their trading volumes
between 1998 and 2008. The smallest increase observed was for interest rate products with volumes
increasing 3.6 times, while stock index options and futures showed the largest rise with volumes
increasing 17 times.
Part of the growth recorded for index derivatives is due to the tremendous success of KOSPI 200
options. 3.9 billion options on the KOSPI 200 index were traded in 2008, representing two thirds of the
global volumes recorded by all derivative exchanges. Even though the notional value of individual
KOSPI 200 options is lower than the average notional value of index options traded on other
exchanges, the Korea Exchange also dominates in terms of the overall notional value traded. The
case of KOSPI 200 options is so specific that it raises statistical difficulties. Therefore, we decided to
present both figures, including and excluding the Korea Exchange when necessary.
When KOSPI 200 options are excluded, the growth of equity index derivatives appeared to be parallel
to that of individual equity derivatives: both segments of the market show volumes traded increased
eleven times, a growth that is lower than KOSPI 200 options, although it remains considerable.
800
600
400
200
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
600
400
200
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
The following table shows the respective contributions to the overall growth of exchanges already
offering in 1998 a given group of products on the one hand, and of exchanges newly offering these
products on the other.
Equity futures show a very different picture, as they did not exist in 1998. This group of products is
new for all 19 exchanges present in this segment.
Index options are the products that showed the most growth, with a contract volume increasing 21
times between 1998 and 2008. Here, new entrants contributed no more than 7% to the overall growth.
However, a single player, the Korea Exchange is the main contributor responsible for the increase in
the number of contracts to 3.9 billion (2.7 billion more options traded on the KOSPI 200 index in 2008
than in 1998). The Korea Exchange accounted for 16% of global volumes in 1998, and more than two
thirds in 2008. Excluding Korea, the contribution of new entrants would represent 23% of the growth.
Index options are the most frequently listed products in the world with 30 exchanges including them in
their offer. Nine new exchanges appeared in this segment, the largest in 2008 being the National
Stock Exchange of India. However, the consolidation of the industry reduced from 47 to 30 the number
of exchanges recording trading volumes in 2008.
Volumes of index futures increased 13 times between 1998 and 2008. The contribution of new
exchanges is of the same order of magnitude as for index options. But the contribution of exchanges
already present in 1998 was lower for index futures (2.1 billion contracts) than for index options (3.9
billion contracts). The average size of index futures contracts is higher than that of index options, and
the overall notional value of traded index futures was 10% higher than that of index options. Finally,
there were as many exchanges offering index futures (30) as index options in 2008. However, both
lists of exchanges are not completely identical: reflecting the split of jurisdictions between options and
futures, four US exchanges list index options without listing index futures. Symmetrically, four relatively
small exchanges are present in the index futures segment, and not on the index options, the largest
being the Turkish Derivatives Exchange (40 million contracts in 2008).
1
Note that for the purpose of this calculation, we do not consider exchanges acquired by other exchanges as new exchanges, even when their
name and their trading processing were completely transformed. For example, NYSE ARCA is considered as the continuation of the Pacific
Stock Exchange as it was acquired by Archipelago in 2005, a group acquired in turn by NYSE Group in 2006.
All exchanges active on LTIR options in 2008 already existed in 1998 and the recorded volumes are
the smallest among all groups of products. The number of exchanges offering LTIR options decreased
from 18 in 1998 to 7 in 2008. The withdrawal of exchanges from this market had little impact (negative
12 million) contracts on the global activity in this group of products. In other words, those exchanges
already recorded low volumes in 1998.
The number of exchanges offering LTIR futures also decreased, from 29 to 16 in the last ten years.
Six new exchanges introduced LTIR futures contracts in their offer (the largest volumes being
recorded by the Korea Exchange in 2008), but nine other exchanges with relatively low levels in 1998
withdrew. However, it should be noted that the size of LTIR contracts is much higher than that of
equity-linked derivatives. As a result, LTIR options record the highest notional value of trading among
all groups of products (280 000 billion US dollars in 2008).
C - Regional developments
The main region that contributed to the growth of equity options over the last ten years was the
Americas, and more specifically the United States. The Americas increased their dominance at the
expense of the Europe, Africa, Middle East region. Part of this trend can be explained by the growth of
ETF options in the United States, products that, in many instances, are substitutes for index options: if
ETF options were not taken into account, the relative weight of the Americas in global equity option
trading would be 80% instead of 83%.
The Asia Pacific region grew at a pace similar to that of the Americas but starting from a much lower
level. The main contributors to growth in that region were Hong Kong Exchanges.
In Europe, the Compound Annual Growth Rate (CAGR) was not as strong as in the other two regions,
but it was still high (14%). The main contributor to growth was Eurex.
4500
Europe, Africa, Middle East
4000
3000
Americas
2500
2000
1500
1000
500
0
1998 2008
The most striking phenomenon when we look at the development of index options is the sharp
increase of Asia through KOSPI 200 options in Korea, which allowed the Asia pacific region to
represent three-quarter of global volumes.
4500
4000
Europe, Africa, Middle East
3500
Asia Pacific
3000
2500 Americas
2000
1500
1000
500
0
1998 2008
If the Korean figures are removed then the Asia Pacific region is still the one with the highest growth
rate by far. Asia has almost caught up with Americas thanks to the tremendous growth of the National
Stock Exchange of India and of TAIFEX in Taiwan. However, as mentioned above, part of the
decrease in the United States market share in index options is offset by the growth of ETF options in
that country.
In Europe, the CAGR has also been very strong over the last ten years. The growth in Europe was
mainly driven by the Dow Jones STOXX 50 options traded on Eurex, where 84% of the European
index options were traded in 2008.
1400
800 Americas
600
400
200
0
1998 2008
Index futures trading developed in all the geographical zones. The most rapid growth was recorded in
the Americas, where the CME Group maintains an overwhelming domination following the merger with
CBOT. The two other regions grew at a similar and rapid pace. The main contribution to growth came
from Eurex in Europe and from the National Stock Exchange of India and Osaka Stock Exchange in
Asia.
2500
1500
Americas
1000
500
0
1998 2008
LTIR derivative trading grew slower than equity-linked products in the last ten years. It remains
marginal in Asia, where only two exchanges, the Tokyo Stock Exchange and the Australian Securities
Exchange, still include LTIR options in their offer.
In Europe the concentration process has been dramatic: 16 exchanges active in LTIR options trading
in 1998 were replaced by only one in 2008 (Eurex). This trend has been accompanied, or was the
result of a concentration of trading on derivatives with German underlyings, the other government
debts being highly correlated to the German one. The Johannesburg Stock Exchange is the only other
remaining player in the region. But this region is the only one where LTIR option trading grew in the
same order of magnitude as other derivatives.
In the Americas, the growth of LTIR futures has been more than twice as strong as options. That
region gained market share for the latter products, while it lost its overwhelming dominance for the
latter. The CME group emerged as the largest player in the Americas, followed by the Montreal Stock
Exchange and Mexder.
180
160
Europe, Africa, Middle East
140
Asia Pacific
120
100 Americas
80
60
40
20
0
1998 2008
1400
800 Americas
600
400
200
0
1998 2008
27%
34%
38%
42%
53% 53%
31% 13%
9%
This section compares trading volumes on cash equity markets and equity-linked derivative markets.
Since the average size of contracts changes over time, cash equity trading and equity-linked derivative
trading have to be compared in value, rather than in volume.
The value of options trading is equal to the value of premiums exchanged, data that is requested in
IOMA annual questionnaires. However, using that information for that purpose would raise two
difficulties: firstly, it is not applicable to futures, whereas index futures represent a major part of equity-
linked derivative trading; secondly, several large exchanges do not provide this data.
We therefore decided to use the “notional value” of derivative trading. This data does not represent
cash payments on derivative markets, but its evolution (rather than its absolute level) can legitimately
be compared to the evolution in value of cash equity trading. As for options premium, this data is not
provided by all exchanges, but those exchanges which do provide it represent more than 96% of
trading volumes, except for equity options. Equity options are the largest segment of the market in
terms of contracts traded, but account for no more than 4% in the total notional value of trading.
Overall, available notional values of trading represent 85% of total trading of equity-linked derivatives
in the world.
Representativeness
Notional value of traded contracts of exchanges for
2008
which notional value
Structure in % of total
In billion USD of trading is available
notional value traded
All Equity-linked derivatives 242 628 567 100% 85.1%
Equity options 9 281 438 4% 62.2%
Stock futures 2 320 319 1% 99.7%
Stock index options 110 000 445 45% 99.5%
Stock index futures 121 026 365 50% 96.6%
The graph below shows the trend in share trading, equity-linked derivative trading and the ratio of
derivative trading to share trading.
From 1998 to 2002, fluctuations of cash and derivative trading mainly reflected ups and downs
in equity prices. During this period, the ratio of derivative trading to cash trading did not
change.
300 2,5
2,1
2,0
250
2,0
1,7
200 1,5
1,4 1,4
1,5
1,2 1,2 1,2
150
1,0
100
0,5
50
0 -
1998 1999 2002 2003 2004 2005 2006 2007 2008
How could the increase in the ratio of derivative trading to cash trading between 2002 and 2007 be
explained?
Firstly, it is interesting to note that all products have contributed to growth while the breakdown of
trading volumes has not substantially changed.
40
30
20
10
0
1 2 3 4 5 6 7 8 9 10
The above analysis demonstrates that the increase of derivative trading was not generated by market
players artificially multiplying trades: the increase in trading activity was parallel to the increase of
open interest. The growth of derivative markets was not generated by any internal dynamic of trading:
it meets the needs of investors and other economic agents willing to hold positions for a certain period
of time. The growth of derivative markets in the last 10 years is the result of a broader use of hedging
and speculative instruments. Hedge funds certainly contributed to the growth, but the fact that volumes
were still high after the crisis in the autumn of 2008 shows that other market participants are now
persistently active.
2
We calculate the velocity of trading as the ratio of the annual volume of contracts traded to the average of the open interest at
the beginning and at the end of the year.
This section aims at comparing trends in OTC derivative trading and on-exchange trading.
Outstanding amounts of OTC derivatives grew very rapidly over the last ten years, at an average
annual growth rate of 22%. The largest component of these positions is related to interest rate
instruments (mainly interest rate swaps, other contracts being forward rate agreements and options).
The CDS market became a very significant segment of the OTC market and reached an outstanding
value close to US$ 60 billion at end of June, according to BIS. It decreased to US$ 42 billion after the
Lehman Brothers’ collapse and the crisis of the interbank market. The CDS market is still dependent
upon email and voice channels and it suffers from very frequent errors (13% of CDS trades according
to ISDA). Therefore exchanges can develop an offer in this market that actually solves many problems
it encounters. The success of such offers will be eased by the standardization of contracts promoted
by ISDA in March 2009.
600 000
500 000
400 000
300 000
200 000
100 000
0
Dec.98 Dec.99 Dec.00 Dec.01 Dec.02 Dec.03 Dec.04 Dec.05 Dec.06 Dec.07 Dec.08
Turning to the comparison between OTC markets and on-exchange markets, caution is needed in the
interpretation of statistics: only aggregate outstanding positions are available from OTC markets, and
this data is different from the open positions recorded by exchanges. Indeed, outstanding positions on
the OTC markets are gross positions: an operator willing to close a position has to take a symmetrical
position and therefore increases the total outstanding positions on the market. Conversely, open
positions on exchanges are net positions. Therefore, OTC outstanding amounts are more comparable
to exchanges volumes than to open positions. In any case, the relative rate of growth of both markets,
rather than their absolute levels, should be analysed.
OTC and on-exchange trading of equity-linked derivatives showed a similar pace of growth from 1998
to 2007. In the first half of 2008, all figures were still rising. But the contraction of the market that
followed the collapse of Lehman Brothers translated into a sharp decrease of equity-linked OTC
notional amount outstanding (-23% as compared to end of 2007) and of the notional value of on-
exchange open positions (-31%). The smaller decrease on OTC markets can be explained by gross
positions that have to be increased in a first step to close existing exposures, as explained above.
Electronic trading is also gaining an increasing share of the trading activity on the exchanges which
have a trading floor (all of them being in the Americas). CBOE is launching a fully electronic market
“C2”. On CME Group the share of electronic trading is also growing regularly and the Comex contracts
listed on NYMEX migrated successfully to the Globex platform.
We report below the number of members for those exchanges who answered this question in the
IOMA questionnaire. The number varies markedly across exchanges, depending on the size of each
market and the types of eligible members. On markets such as CBOE, National Stock Exchange of
India and NYSE Liffe, individual traders can become members of the exchange, while membership is
reserved to institutions in most other markets.
Since 2006 – the first year when this information was requested in the IOMA questionnaire – the
average number of members has decreased because CBOE members have fallen from 2 002 to
1 149. But the median has increased.
Most exchanges do not admit buy-side institutions as members. Only two exchanges, TAIFEX and
Hong Kong Exchanges, indicate that a majority of their members are buy-side institutions. However,
even if buy-side institutions are not members of exchanges, and have no legal Direct Market Access
(DMA), a number of them achieve the same result using order routing facilities to route orders to the
market, and de-facto automatically to the central order book. Most exchanges are not able to measure
the relative weight of DMA in the order flow. However BOVESPA reports a percentage of 17% of the
trading value, MexDer 4% in equity index futures and 35% in equity options. MEFF estimates that the
business brought by DMA represents around 25%.
Similarly, most exchanges cannot measure the relative weight of orders routed by hedge funds, as
they have no access to the breakdown of their members’ clients. But most of them indicate that they
were active participants in the market, contributing, among other things, to the growth of algorithmic
trading on electronic platforms. New statistics available from CME Group indicate that the top 25
hedge funds active on the market accounted for almost 9% of the volume traded on the market. But
their volume decreased 32% in the fourth quarter of 2008 when compared to the third quarter of the
3
same year .
3
Source : CME Group, quoted in Burghardt and Acworth, FIA Annual Volume Survey, March 2009
Over the last ten years, the development of derivative trading was very impressive. Volumes increased
7.8 times and grew even more rapidly than volumes on cash markets, especially between 2003 and
2007, when equity markets were bullish.
The highest growth rate was observed for equity derivatives: volumes increased 13.5 times between
1998 and 2008 and in 2008 they accounted for 69% of the derivative trading volumes against 40% in
1998. The growth of equity derivatives has been stronger than the one of cash equity markets. The
other products, namely interest rate, currency and commodity derivatives, also experienced rapid
growth during this period: they grew respectively 5.7, 4.9 and 7.8 times.
Regarding regional development of derivative trading, the most striking phenomenon is the
tremendous growth of Asia with the impressive development of KOSPI 200 Options. Apart from this
particular product, Asia Pacific region also developed with the arrival of new stock exchanges. In
Americas, equity options were very successful, particularly with options on ETFs and in Europe, index
options experienced a strong growth mainly driven by Eurex.
In ten years, the industry of stock exchanges saw many changes. There have been a lot of mergers
and acquisitions involving the biggest stock exchanges and new exchanges appeared.
In the recent years, electronic trading has gained an increasing share of the trading activity.
Nevertheless, the analysis of the velocity of trading demonstrates that the increase of derivative
trading was not mainly generated by the development of algorithmic trading. The growth of derivative
markets is driven by an increasing use of its products by investors and other economic agents. Further
developments are expected following the demand for safer markets by investors, market players and
regulators, which should result in a transfer of a significant part of OTC trading to on-exchange trading.