Growth in Americas helps derivatives market offset declines in EMEA & Asia-Pacific - new WFE IOMA report

By: The WFE Statistics Team Apr 2018

The WFE has published its annual WFE IOMA Derivatives Market Report which shows the total volume of derivatives traded in 2017 declined by 0.2%.

Stock markets worldwide and the global economy ended 2017 on a strong note. Benchmark market indices soared to record-high levels across many markets. There was a synchronised recovery in growth rates of GDP, low levels of inflation, low market volatility, a continuation of accommodative monetary policy in many regions, and a recovery in commodity prices. The report focused on trends in derivatives markets against this backdrop, and examined how market participants have responded to shifts in the underlying market.

You can download the full report here.

Key highlights of the report:

  • Derivative volumes were down slightly (0.2%) on 2016 with a total of 25.0 billion contracts traded.
  • This was made up of 10.5 billion options and 14.5 billion futures.
  • An increase in the volume traded in the Americas (up 5.8%) was offset by declines in Asia-Pacific and EMEA (down 3.5% and 5.3%) respectively. 
  • While volumes of equity and interest rate derivatives increased on 2016 (up 5.4% and 13.1%), volumes of currency, commodity and other derivatives were down 3.2%, 14.5% and 4.3% respectively on 2016. 
  • Over 3.9 billion interest rate derivative contracts were traded in 2017 - the largest number in the time-period examined (since 2005). 
  • The fall in volumes of commodity derivatives traded was the first year-on-year decline in volumes in the 13-year period under review, and was driven by falls in volumes traded of agriculture and non-precious metals derivatives. 
  • As total volumes traded in 2017 were largely in line with 2016, the overall share of volumes traded has shifted with equity and interest rate derivatives now making up 48% and 16% of the total respectively, and commodity derivatives accounting for 24%.

Asset breakdown for 2017:

  • Equity derivatives remained the most actively traded exchange traded derivative product category, at 48% of total volumes, but this was the second consecutive year in which they accounted for less than 50% of the total derivatives volume traded. While in the Americas and Asia-Pacific regions (where nearly 80% of equity derivatives volumes are traded) the numbers of contracts traded were up 2.4% and 23.9% respectively, there was a 10.9% decline in the volumes traded in the EMEA region.
  • Interest rate derivatives accounted for 16% of total derivatives contracts traded in 2017, with over 3.9 billion contracts traded in 2017. This was the largest number of interest rate derivatives contracts traded in the time period examined (since 2005). Volumes traded were up 13.1% on 2016 driven by increases in volumes of both STIR and LTIR options and futures. The Americas and EMEA regions, which accounted for nearly 94% of total interest rate derivatives volumes, saw an 11.7% and 18% increase in number of contracts on 2016.
  • Currency derivatives volumes traded (11% of the total derivatives volume traded) fell by 3.2% vs 2016, largely due to a 19.9% drop in the volumes traded in the EMEA region, which accounts for 32% of total volumes. The Americas and Asia-Pacific saw an uptick in volumes traded, up 18.8% and 3.8% respectively on 2016.
  • Commodity derivatives saw a year-on-year decline in volumes traded, down 14.5% on 2016, for the first time in the period under review. This was due to a sharp fall in the Asia-Pacific region (down 25.3%) where 56% of the volumes were traded. The Americas and EMEA regions recorded increases in volumes traded (up 3.5% and 6% respectively). However, commodity derivatives remain the second most actively traded product type, accounting for 24% of total exchange traded derivatives volumes.
  • Other derivatives in the survey included index volatility options and futures, REIT derivatives, dividend index derivatives, CFDs, and inflation indexed futures and options. Volumes in this category dropped by 4.3% on 2016, driven by the decline in volumes traded on Johannesburg Stock Exchange and Japan Exchange Group – down 36% and 6% respectively on 2016.

Forty-eight exchanges responded to the survey, a mixture of WFE members, affiliates and other exchanges that voluntarily submit data. The report covers the period from January to December 2017.