London, Wednesday 10 April 2019 – The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has today published its annual IOMA Derivatives Report, which shows that overall derivatives contracts traded in 2018 exceeded 30 billion for the first time since the WFE started publishing the report in 2005.
Global financial markets had a turbulent year in 2018. Volatility made a come-back, breaking the spell of stable markets in 2017. The return of volatility was against the backdrop of a global economic slowdown, geopolitical and trade tensions, concerns about tightening monetary policy, currency exchange rate fluctuations, and increased scrutiny of the technology sector among other factors. For stock markets, while the year began on a high note, with domestic market capitalisation scaling record levels in markets across the globe, there were significant declines in market valuations by the end of the year. Meanwhile, overall trading activity was up, with value and volumes of trades in equity markets up 15.4% and 11.5% respectively on 2017.
Today’s report focuses on trends in derivatives against this backdrop, and examines how market participants responded to shifts in the underlying market. In this high volatility environment, 2018 saw record high volumes of trading in derivatives. For the first time in the period under review (since 2005), overall volumes exceeded the 30 billion mark, with 30.1 billion contracts traded in 2018. This was a 20.9% increase in volumes on 2017.
- The overall increase in volumes was driven by growth across all three regions. The Americas region was up 23.8%, the Asia-Pacific region up 27.1%, and the EMEA region up 5.5%.
- Nearly all the derivatives product categories - namely equity, ETF, currency, interest rate and commodities - recorded increases in volumes on 2017. The one exception was ‘other derivatives’, which consists of ‘other’ options and futures.
- In 2018, equity derivatives volumes exceeded 13.6 billion contracts, the highest in the 14-year period under review. Volumes were up 33.8% on 2017, due to increases across single stock and stock index options and futures.
- Interest rate derivatives volumes were up 14.6% on 2017, with a trading volume of 4.6 billion contracts, a new high for interest rate derivatives.
- Currency derivatives reached a record high of 3.7 billion contracts traded in 2018, a 32.9% increase on 2017.
- Commodity derivatives volumes saw a marginal 0.6% increase on 2017, largely due to declining volumes in the Asia-Pacific region (1.4%), where a major share of global commodity derivatives trading takes place. Agriculture, energy and non-precious metals accounted for the bulk (32%, 31% and 26% respectively) of global commodity derivatives volumes. While volumes of agriculture and energy-based derivatives were up 9.9% and 6.2% respectively, non-precious metals volumes fell 12.6% on 2017.
Nandini Sukumar, Chief Executive Officer, WFE said: “The key headline here is the astonishing surge in overall derivatives volumes. This is testament to the hedging power of derivatives, and the crucial role they play in volatile markets. It is also interesting to note how all three regions played a part in this volume growth, further demonstrating the global relevance of derivatives markets.”
This report was collated from an annual WFE survey of the derivatives markets operated by its members, affiliates and other exchanges that voluntarily submit data for this survey. Forty-eight exchanges responded to this year’s survey. The report covers the period from January to December 2018.
The 36th IOMA: WFE’s Clearing & Derivatives Conference was held last week in Mumbai, India (2-4 April). Hosted by National Stock Exchange of India (NSE), the event brought together more than 200 industry leaders to debate a diverse range of risk, policy, regulatory and operational issues impacting the derivatives and post-trade industry.
You can access the full report here.