While activity in futures and options was undeterred by the pandemic in 2020, logging record volume for a third year in a row, a closer look at data produced by the Futures Industry Association shows a shift in recent years in where that volume occurred and what was most actively traded.
In a webinar held Wednesday, Will Acworth, senior vice president of publications, data and research at the FIA, acknowledged that much of the growth in 2020 derivatives trading was driven by nascent markets in India, China and Brazil.
In a ranking by 2020 volume, the National Stock Exchange of India (NSE) was the leading global exchange, followed by Brazil’s B3 at No. 2. CME Group was ranked No. 3, according to the FIA.
Total global volume in futures and options rose 35.6 percent in 2020, compared with 2019 totals. Of the tally for 2020, futures trading rose 32.7 percent to 25.55 billion and options trading increased 39.3 percent to 21.22 billion. Total open interest was up a more modest 9.7 percent at year-end, suggesting the increased trading did not always equate with the holding of positions.
On a regional basis, Asia Pacific now represents 43 percent of the global market in terms of futures and options contracts traded, Acworth said, and 9 percent of the average open interest. Also worth noting: Latin America now is a bigger market than Europe in terms of contracts traded, a trend he attributed partly to historically low interest rates in Brazil that pushed “savers into becoming investors.”
Looking at market sectors, last year’s equity index contract gains were fueled by growth in contracts that were “off the radar” of many institutional participants, Acworth said. The leading contracts by volume in 2020 were the Bank Nifty Index Options traded at NSE India with 4.29 billion contracts, a gain of 43.5 percent from 2019. The second most widely traded equity index contracts were Bovespa Mini Index Futures at the B3 exchange, with 2.88 billion contracts, the FIA data showed.
In the U.S., trading of single-stock equity options was a well-advertised bright spot in last year’s volume totals. Micro mini contracts favored by retail investors also gained ground. Volume in Micro E-mini S&P 500 futures at CME, for example, was up more than 400 percent for the year, trading nearly 227 million contracts in 2020.
While equity options trading jumped, volume in interest rate derivatives slumped as 2020 progressed, noted Erin Perzov, head of futures content at Morgan Stanley. Also speaking at the webinar, Perzov noted that options on short-term interest rates were both the biggest drivers of volume in the sector at the start of last year and major contributors to its fall toward year-end. She added that volume and open interest have started to perk up steadily in early 2021.
As interest rates flattened in response to central bank policies that were aimed at propping up the economy, volumes in interest rate futures and options scored a four-year low in 2020. That category was down 13 percent on a global volume basis, according to the FIA, with the biggest declines logged by the Eurodollar complex. Usually a volume leader, CME Eurodollar futures were down 25.8 percent on a year-over-year basis with just 510 million contracts traded in 2020.
Looking at gains in commodity trading during 2020, the upswing in that sector appeared to be largely a China story, according to FIA data. Of the top 20 agricultural contracts ranked by volume, 10 were traded at Chinese exchanges, with No. 1 Soybean Meal Futures at the Dalian Futures Exchange trading 359 million contracts for the year. In the energy sector, the leading contract was Brent Oil Futures at the Moscow Exchange, with annual volume of just under 743 million.