Institutional Trading, Options Growth Among Q1 2022 Trends, say FIA Webinar Participants

Sarah Rudolph

Sarah Rudolph

Editor-in-Chief

The trend for the first quarter of 2022 is a revival of institutional trading – along with continued rapid growth in the options space, according to an FIA webinar Thursday morning hosted by Will Acworth, senior vice president of publications, data & research, FIA, with Morgan Stanley’s Reed Staub, executive director, head of US interest rate futures, and Erin Perzov, head of futures content. 

Here are a few highlights from the webinar:

Options on futures, securities and indices grew 61% this quarter compared to Q1 last year, Acworth said. The futures space was flat as far as volume, but open interest in futures picked up this quarter. 

Open interest in futures and options at the global level is higher than it was a few years ago but hasn’t changed much since last year.  Total open interest in Q1 was 1.1 billion contracts, up 1.4% from a year ago and 25% from three years ago. “So it’s a slow but steady increase,” Acworth said. That indicates institutional interest, he added. 

“In Q1 we saw significant uptick in derivatives trading on North American exchanges, which traded 792 million contracts in Q1,” Acworth said, the highest amount of trading since Q1 of 2000.   The same trend is taking place in Europe (including the UK), with trading at 333 million contracts in Q1 – the highest since the pandemic-related volatility two years ago.

Acworth noted that the FIA collects its data from 85 exchanges and clearing houses around the world. It tracks the number of contracts traded but not the notional value. 

Trading of Eurodollar futures remains strong, but is roughly the same as a year ago. On the other hand, trading of options on Eurodollar futures has really picked up, Acworth said. 

He also mentioned a contract which is “a bit outside our universe”: options on a corporate bond ETF – where there has been a “pretty significant” pickup in volume and open interest. “It is one of the few [listed derivatives] contracts that allows people to take a view on corporate credit as an asset class,” Acworth noted.   

Derivatives on government debt are a trend with institutions, he said. Trading in government bond contracts has risen, with the Bobl in Europe – based on debt with a maturity of 4-5 years – having jumped 35% in trading volume and 50% in open interest over last year.

The U.S., too, has seen a big increase in activity in trading the two-year and 5-year Treasuries, Acworth said. “There has been a big uptick on options on Treasury futures, although open interest is about the same as last year. That shows that participants are repositioning their portfolios, but not necessarily adding a lot of positions.”

SONIA futures at ICE – a replacement for short sterling – also picked up momentum last year, in a successful transition from the old Libor-based contract. The SONIA futures are now among the most heavily traded short term interest rate contracts in the world, Acworth said. 

Also: There has been extraordinary growth in the mini Bovespa contract in Brazil. And in the energy sector, the WTI and Brent contracts are the most important for hedging. The TTF gas contract at Title Transfer Facility in the Netherlands has become a very important benchmark for European trading in natural gas, with volumes up around fivefold.

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