2012 was a very challenging year for exchanges: the volumes of all products traded on WFE members were significantly down: -22.5% for equity transactions (USD 49 tn) and -20% for derivatives (14.9 bn of equity and interest rates contracts traded). Cash markets continued to suffer from the relative disaffection for equities; derivatives markets were affected from the continued low interest rate environment and the significant decrease of volatility, both factors reducing hedging needs.
The other products traded by WFE exchanges also experienced very sharp declines of turnover value:
- ETFs : -31.6% (USD 7.3 tn)
- Securitized derivatives: -43.3% (USD 652 bn)
- Bonds: -20% (USD 26.1 tn)
On a more positive note, the only indicator growing was the market capitalization. After the sharp decline observed in 2011 during the summer, it recovered in 2012 with a 15% growth rate, getting back to its end-of 2010 level. Number of listed companies remain stable at 46 332 (-0.8%).
Market capitalization USD 55 tn +15.1%
In 2012, the global market capitalization recovered with a 15.1% growth rate to USD 54 570 mn. This growth rate was nevertheless not sufficient to reach again the levels observed during the first months of 2011.
The best performance in 2012 was observed in the Americas (+17.2%) followed by Asia - Pacific (+15.4%) and EAME (+11.6%).
In the Americas, the growth was mainly driven by the US exchanges that increased 19% while Canada increased slightly less (8%) and contrasted trends were observed in Latin American countries.
In Asia - Pacific, the highest growth rates were observed in Thailand (+45%), Philippine (+39%), Singapore (+28%), Hong Kong (+25%) and India (+25%) and relatively lower growth rates occurred in mainland China and Japan (respectively +8% and +5%).
In EAME, Africa Middle East region experienced a 20% growth rate, eurozone increased 14% while the LSEG in the UK rose 4%.
Number of listings 6 332 -0.8%
In 2012 the total number of listed companies on WFE exchanges was steady (-0.3%): -0.4% in Americas, +0.9% in Asia - Pacific and -2.2% in EAME.
Value of share trading USD 49 tn -22.5%
Despite the good performance of market capitalization in 2012, Electronic Order Book (EOB) turnover value declined by 22.5%. All the regions were affected by this trading volumes drop: EAME (-24.1%), Americas (-23.2%) and Asia Pacific (-20%).
Number of EOB trades 9 780 mn -14.3%
The global number of trades also decreased significantly in 2012, but in Asia - Pacific and EAME, the decrease was less pronounced than for the value of share trading.
In 2012, the average transaction size (weighted by value of share trading) slightly increased from USD 8 100 to 8 300. In the EAME region the average transaction size followed the Americas trend and stopped decreasing. Though we are lacking more detailed figures, this could be an indication of the slowdown in activity of algorithmic trading (including HFT) in this region. The average transaction size in Asia Pacific is still below the WFE average indicating a very active retail market.
In 2012, the global market capitalization recovered with a 15.1% growth rate to USD 54 570 mn.
For the first time since 2004, the number of equity derivative contracts traded on exchanges decreased in 2012 (-21%).
Equity and IR derivatives
Number of contracts traded 14.9 bn -20.3%
For the first time since 2004, the number of equity derivative contracts traded on exchanges decreased in 2012 (-21%). Index products were the most affected: -39.6% for stock index options, -20.3% for ETF options, and -14.1% for stock index futures.
This significant decrease in stock index options was partly explained by the sharp decrease of number of index options traded on Korea Exchange following the multiplication by five of the size of the newly listed contracts on KOSPI 200 since March 2012. Excluding Korean index options, the decline in stock index options was -9.4%. And the overall decline in equity and IR derivatives was -11%.
This decline in equity derivatives mirrors the one in the value of cash equities traded and is also probably explained by the significant decrease in volatility observed in 2012. Volatility indices decreased significantly in 2012, except in Japan, to end the year at relatively low levels.
- S&P 500 Volatility (VIX): - 23% (13.02)
- EURO STOXX 50 Volatility: -33.6% (21.35) and FTSE100 Volatility Index: -19.7% (18.05)
- Nikkei Stock Average Volatility Index: + 4.5% (22.45) and HSI Volatility Index : -30.2% (17.19)
The volume of Interest Rate options and futures traded also decreased significantly in 2012 (-17%). Factors generically seen as unfavorable for interest rates derivatives (low interest rates environments, no economic growth and credit expansion) continue to prevail in certain regions and could explain that trend.
Bonds (cash markets)
Turnover value USD 26.1 tn -20%
After two years of significant increase, Bonds trading also declined in 2012 (-20%).
Turnover value USD 7.3 tn -31.6%
Listings 7 721 +12%
A sharp decrease (-31.6%) on the turnover realized in 2012. The decrease was mainly due to the United States performance (-33%) which represents 83% of the WFE total turnover.
Turnover value USD 652 bn USD -43.3%
Listings 1 263 492 +16.2%
Securitized derivatives listings continued to grow (+16.2%), but overall volumes declined sharply (-43.3%).