Global volume in futures and options is on track for a banner year in 2020, with growth fueled largely by equity derivatives amid unparalleled levels of volatility. Equity derivatives saw a total of more than 7 billion contracts traded in the third quarter, according to data compiled by the FIA.
Total volume for all exchanges tallied 11.8 billion contracts for the third quarter, compared with 8.6 billion in third-quarter 2019. For the year 2020 through September, the volume tally was 33.7 billion contracts.
Looking at the top five exchanges by total volume, the FIA ranked the National Stock Exchange of India as No.1 with about 6.1 billion contracts traded in the nine months from January through September 2020, followed by the B3 (Brasil, Bolsa, Balcão), which was ranked as No. 2 with 4.5 billion contracts. CME Group’s exchanges came in at No. 3 with a combined total of about 3.8 billion contracts, ICE was No. 4 with 2.1 billion and Cboe Holdings was No. 5 with 1.9 billion contracts traded.
Will Acworth, FIA senior vice president of publications, data and research, noted in a FIA webinar Wednesday that equity options outperformed during the period. In addition, commodities “were heavily a China story,” helping agricultural commodities outpace energy contracts, and precious metal contracts were up about 73% in the January through September period.
A boom in volume at the Shanghai Futures Exchange, which FIA ranked as No. 9 among global exchanges for the first nine months of the year, with 1.5 billion contracts traded, suggests China’s long-term agenda is to take an even bigger role in the commodity markets, Acworth said.
Other Chinese exchanges also played their part. The FIA reported the No. 1 agricultural future contract traded globally was soybean meal futures at the Dalian Commodity Exchange, with volume of 247,168,999 contracts from January through September 2020. That compared with corn futures at the CME Group’s Chicago Board of Trade, which traded 67,458,213 contracts in the same period.
In contrast, volume in interest rate futures and options was at its lowest level since 2016, FIA data showed – a reflection of the near-zero interest policies of the Federal Reserve and other central banks that were designed to help offset the economic disruptions caused by COVID-19.
Micro contracts were briskly traded, growing to among the top 20 contracts in volume during the quarter, as retail participation increased, Acworth said. The “Robinhood Effect” — a retail phenonemon as younger, more novice investors entered the market — boosted single-stock volume, he said.
Joseph Nehoral, co-head of global futures and options at Goldman Sachs, who also spoke at the webinar, said retail participation, “skewed the (quarterly) details a bit.” (Retail investors tend to take shorter-term positions than institutions.) But he added that it was no accident that there was a surge in equity trading given that institutional migration from over-the-counter trading to listed contracts “continues apace.”
Nehoral also noted evidence of greater fragmentation of the equity index market as investors transitioned into more customized index futures, away from bellwether blue-chip indexes.
In Europe, total return futures saw growth in open interest as institutions looked to avoid the European dividend volatility seen early in the year. MSCI products gained traction. Euro-denominated MSCI World Net Total Return contract at Eurex (RSWA) posted an 84% increase in open interest in the third quarter based on notional value, said Goldman Sachs analyst Anna Whitlow. ICE, Eurex, SGX and HKFE all offer MSCI products, she noted.