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IOMA Derivatives Market Survey 2008
Conducted by WFE
With the help of Didier Davydoff and
Grégoire Naacke
IEM Finance
May 2009
As of May 2009, the members of IOMA / IOCA were:
Athens Derivatives Exchanges MEFF
Australian Securities Exchange Mercado Mexicano de Derivados (Mexder)
BM&FBOVESPA NYSE Euronext
Bolsa de Comercio de Buenos Aires NYSE Liffe
Bolsa de Comercio de Santiago NASDAQ OMX Group
Bombay Stock Exchange National Stock Exchange of India
Borsa Italiana Osaka Securities Exchange
Bursa Malaysia Derivatives Oslo Børs
Bursa Malaysia Derivatives Clearing Singapore Exchange
Canadian Derivatives Clearing Taiwan Futures Exchange
Chicago Board Options Exchange Tel-Aviv Stock Exchange
CME Group Thailand Futures Exchange
Eurex Frankfurt The Clearing Corporation
Eurex Zürich The Options Clearing Corporation
Hong Kong Exchanges and Clearing TMX Group
ICE Futures Tokyo Stock Exchange
International Securities Exchange Warsaw Stock Exchange
Johannesburg Stock Exchange Wiener Börse
Korea Exchange Zhengzhou Commodity Exchange
LCH.Clearnet
Every effort has been made to ensure that the information in this survey is accurate at the time of
printing, but the Secretariat cannot accept responsibility for errors or omissions.
International Options Market Association (IOMA)
2008 Derivatives Market Survey
Table of Contents
Introduction ................................................................................................................................ 4
The industry structure................................................................................................................. 5
The global derivatives market .................................................................................................... 8
Exchange and products trends .................................................................................................. 10
A - Equity products .......................................................................................................... 11
Stock options ......................................................................................................... 13
Stock futures .......................................................................................................... 18
Index options ......................................................................................................... 20
Index futures .......................................................................................................... 25
B – Interest rate products ................................................................................................. 30
STIR options and futures ....................................................................................... 31
LTIR options and futures ...................................................................................... 35
C – Currency products...................................................................................................... 41
D - Commodity derivatives .............................................................................................. 46
Energy derivatives ................................................................................................. 51
Metal derivatives ................................................................................................... 52
Agricultural derivatives ......................................................................................... 52
Gathering statistics on retail trading......................................................................................... 54
OTC trades registered by exchanges ........................................................................................ 55
Prospects for clearing organizations......................................................................................... 57
Conclusion ................................................................................................................................ 59
IOMA Derivatives Market Survey 2008 – May 2009 3
Introduction
This report is the result of the annual survey conducted by the World Federation of Exchanges for the
International Options Markets Association (IOMA) derivatives exchanges. This report deals with the
trading of derivatives products, and it covers 51 exchanges. Some of these exchanges trade a wide
range of derivatives contracts, while many specialize in a single area of the market. The survey results
were analyzed into six groups representing underlying assets:
• Single equity
• Equity indices
• Short-term interest rates
• Long-term interest rates
• Currencies
• Commodities
The survey was compiled from questionnaire responses sent by IOMA members, and data from
exchange websites. The authors wish to thank exchanges which responded to the questionnaire, and
especially exchange staff who gave further assistance in response to enquiries.
The report begins with a brief overview of changes to the structure of the industry during 2008. The
section “The Global Derivatives Market” describes the overall developments in derivative volumes.
The section “Exchange and Product Trends” examines volumes and value at each exchange within
each major product type. It shows changes from 2007 for all exchanges. The study ends with
“Concluding Remarks”, which raise further questions for consideration.
The findings of this report were presented by Didier Davydoff at the IOMA/IOCA Annual Conference
held in Frankfurt in April 2009.
IOMA Derivatives Market Survey 2008 – May 2009
4
The industry structure
Several mergers and acquisitions were initiated or completed in 2008:
In May 2008, BOVESPA Holding and BM&F were integrated into a new corporation named
BM&FBOVESPA SA. Both markets are very complementary: the main strength of BOVESPA
market is its equity option trading, while the most active contracts on BM&F markets are
interest rate and currency derivatives.
In May 2008, TSX Group and Montréal Exchange finished the completion of their business
combination to create TMX Group Inc.
In July 2008, NASDAQ OMX Group completed the acquisition of the Philadelphia Stock
Exchange, expanding the NASDAQ OMX Group’s presence in the derivatives market. The
Philadelphia Stock Exchange is renamed NASDAQ OMX PHLX.
In September 2008, the CME Group completed its acquisition of NYMEX Holdings. We recall
that CME and CBOT had merged to form the CME group in July 2007. In the IOMA survey
2007, we presented statistics relating to the former CME and the former CBOT separately. For
the present 2008 survey, we present aggregate statistics for the whole group: CME + CBOT +
NYMEX. On the whole, 3.1 billion contracts were traded in 2008 on the CME Group markets.
In September 2008, the Montréal Exchange (a TMX Group company) completed an
acquisition giving it a majority ownership interest of 53.2% in the Boston Options Exchange
Group (BOX). However, statistics relating to the two exchanges remain separate.
In October 2008, NYSE Euronext completed its acquisition of the American Stock Exchange,
becoming the third-largest US options marketplace. Statistics of the new entity “NYSE Amex”
are presented separately in the present report.
In October 2008, Wiener Börse acquired a stake in the Ljubljana Stock Exchange and the
Budapest Stock Exchange and became the majority owner of the two stock exchanges.
For the first time, statistics of commodities derivatives traded on the German RWX Risk Management
Exchange, the former WTB based in Hanover, are included in the present report. In March 2009,
Eurex expressed its interest in acquiring RWX.
In 2008, several exchanges added a new category of underlyings to their existing range of products.
Symmetrically, some categories of underlyings were dropped from the listings on some exchanges or
were no longer traded.
IOMA Derivatives Market Survey 2008 – May 2009 5
Products added or dropped during 2008
Added Dropped
Stock options Warsaw Stock Exchange
Stock futures Korea Exchange, Thailand Futures Exchange
Stock index options Budapest Stock Exchange
STIR futures Budapest Stock Exchange
LTIR futures Hong Kong Exchange, Warsaw Stock Exchange
Currency futures NSE India
Commodity options Tokyo Grain Exchange
Commodity futures Hong Kong Exchanges Singapore Exchange
On average, exchanges offer four different product lines (excluding exotic products). NYSE Liffe
(European markets) and the Australian Securities Exchange have the most diversified offer (11
different product lines) while nine exchanges offer one product line only.
Exchanges have numerous projects for launching new types of contracts.
Among exchanges that have answered the question relating to their prospects for listing new products,
12 said they do plan on offering new products outside of their current asset classes during 2009 and
10 said they do not.
Most frequently cited classes of products are exotic derivatives, such as carbon options on the Hong
Kong exchanges, or credit options and new volatility futures on CBOE.
The Australian Securities Exchange, TAIFEX and Eurex have the most numerous projects, each of
them planning to offer new products in six asset classes in 2009. For example, Eurex intends to
launch commodity index futures, and options and futures on energy. Eurex also launched the first
property futures in February 2009, based on the IPD UK annual All Property Index.
The London Stock Exchange intends to list exchange traded contracts for Difference on the FTSE100
equity underlyings.
IOMA Derivatives Market Survey 2008 – May 2009
6
Number of product lines
Zhengzhou Commodity Exchange
Tokyo Grain Exchange
Thailand Futures Exchange (TFEX)
1) Single stock options
Shanghai Futures Exchange 2) Single stock futures
RMX 3) Stock index options
NYSE Arca Options 4) Single index futures
Dalian Commodity Exchange 5) STIR options
Central Japan Commodity Exchanges
6) STIR futures
Boston Options Exchange
Tokyo Stock Exchange Group 7) LTIR options
Thailand Futures Exchange (TFEX) 8) LTIR futures
One Chicago 9) Currency options
NYSE Amex 10) Currency futures
Mercado a Término de Buenos Aires
11) Commodity options
London Metal Exchange
ICE Futures Europe
12) Commodity futures
ICE Futures Canada
Buenos Aires SE
Warsaw SE
Tokyo Financial Exchange
Tel Aviv SE
Tokyo Stock Exchange Group
Osaka SE
International Securities Exchange (ISE)
Bombay Stock Exchange
Wiener Börse
Turkish Derivatives Exchange
ROFEX
Oslo Børs
NASDAQ OMX PHLX
Chicago Board Options Exchange (CBOE)
Bursa Malaysia
Borsa Italiana
Athens Derivatives
Singapore Exchange
National Stock Exchange of India
MEFF
TAIFEX
ICE Futures U.S.
Hong Kong Exchanges
Budapest SE
NASDAQ OMX Nordic Exchanges
Korea Exchange
Eurex
Montréal Exchange
MexDer
Johannesburg SE
CME Group
BM&FBOVESPA
NYSE Liffe (European markets)
Australian SE
0 1 2 3 4 5 6 7 8 9 10 11 12
IOMA Derivatives Market Survey 2008 – May 2009 7
The global derivatives market
17 billion derivative contracts were transacted in 2008 on exchanges worldwide (7.8 billion futures and
9.3 billion options). These figures are apparently positive as they represent a new historic record.
However, we will show below that these figures hide wide disparities between products and between
the first three quarters of the year and the last quarter, Lehman Brothers’ collapse marking a profound
break in the activity of the derivatives markets
2008 Worldwide derivatives volume
17 billion contracts trades
7.79 Billion 9.28 Billion
Options
Futures
Derivatives volume growth
18
16 2002
14 2003
Billion contracts
12 2004
10
2005
8
2006
6
2007
4
2008
2
0
Options Futures Total
IOMA Derivatives Market Survey 2008 – May 2009
8
The pace of growth in 2008 (+13%) was significantly below the two previous years. Although futures
declined the most, their growth is still superior (+14%) to that of options (+11%). Futures growth is the
lowest for six years and that for options is similar to 2005 and 2006. Again, the break of September
triggered a much stronger slowdown, especially for futures.
Derivatives volume growth rate
40%
35%
2003/02
30%
2004/03
25%
2005/04
20%
2006/05
15% 2007/06
10% 2008/07
5%
0%
Options Futures Total
The global activity of derivatives exchanges is heavily influenced by the weight of the Korea Exchange
in equity index options trading. When KOSPI 200 options traded on the Korean market are excluded
from statistics, the growth rate of options trades is the weakest since 2003.
Derivatives volume growth rate
(Excluding KOSPI 200 options in Korea)
40%
35%
2003/02
30%
2004/03
25%
2005/04
20%
2006/05
15%
2007/06
10%
2008/07
5%
0%
Options Futures Total
IOMA Derivatives Market Survey 2008 – May 2009 9
Exchange and products trends
In 2008, the growth rate in the volume of equity derivatives was more than halved compared to
2007, even if KOSPI 200 options are taken into account or not.
For the first time since 2003, negative growth rates were observed on all groups of interest rate
products.
The growth rate of currency derivatives was ten times lower compared to 2007.
Commodity derivatives, driven by Chinese markets, seem to be the only segment that has not been
affected by the financial crisis.
Contracts traded by product group (billion contracts)
14 2,1
Equity
12 1,8
Currency and commodity
Interest rate
Equity and interest rate
10 Currency 1,5
8 Commodity 1,2
6 0,9
4 0,6
2 0,3
0 0,0
2002 2003 2004 2005 2006 2007 2008
2008/2007 volume growth rate
Stock Stock index STIR LTIR Currency Commodities
Options 17.1 % 8.9 % - 6.3 % - 9.4 % 16.6 % 16.4 %
Futures 66.0 % 34.0 % -18.3 % -13.6 % 3.5 % 37.8 %
IOMA Derivatives Market Survey 2008 – May 2009
10
A - Equity products
In 2008, equity products accounted for 69% of all derivatives contracts in terms of the number of
contracts traded.
Equity derivatives developed in a period of historical volatility on the underlying cash markets. During
the third quarter of 2008, the level of volatility was the highest observed since 1929. At the beginning
of 2009, the volatility remained high but at levels that had already been observed in the past (in
August 2002 for example).
Global equity indices volatility
120%
(Annualized volatility of global indexes over 20 days)
Dow Jones
100% Nikkei 225
Dow Jones STOXX 600
80%
60%
40%
20%
0%
Feb-05 May-05 Aug-05 Nov-05 Feb-06 May-06 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09
The growth rate of volume was half as compared to the previous year for all equity products except for
index futures. For index futures it decreased by 12% (34% in 2008 against 46% in 2007)
IOMA Derivatives Market Survey 2008 – May 2009 11
Equity products volume growth (billion contracts)
5,0 2,5
4,5
Stock options Index options
4,0 2,0
Stock futures Index futures
3,5
3,0 1,5
Options
Futures
2,5
2,0 1,0
1,5
1,0 0,5
0,5
0,0 0,0
2002 2003 2004 2005 2006 2007 2008
As already noted in last year’s IOMA derivatives market survey, the size of the contracts traded shows
that retail investors play a greater role in single stock derivative trading than they do in stock index
trading.
Average notional value of contracts decreased for all types of equity products in 2008, in proportion to
the fall of equity prices.
Average notional value of one contract
(all markets, in thousands of USD)
2007 2008
Equity options 4.3 3.4
Equity futures 4.0 2.2
Stock index options 35.9 27.3
Stock index futures 73.4 55.8
OTC trading in equity-linked derivatives is still much less significant than on other derivatives
segments. Equity-linked derivatives accounted for only 1.5% of the total OTC derivatives outstanding
on all underlying products at the end of June 2008 against 1.7% at the end of June 2007.
Except American equities forwards and swaps, all segments of OTC equity-linked markets increased
between June 2007 and June 2008. As already noted in last year’s IOMA derivatives market survey, it
is worth noting that OTC trading of equity derivatives is more significant in Europe than in other
regions, relatively to the size of organised markets.
IOMA Derivatives Market Survey 2008 – May 2009
12
Notional amounts outstanding of OTC equity-linked derivatives
Notional amounts
Annual
in billion of USD
June 2007 June 2008 Change
American Options 1 112 1 300 17%
Equities Forwards & swaps 795 764 -4%
European Options 3 769 4 750 26%
Equities Forwards & swaps 1 289 1 384 7%
Asian Options 949 1 010 6%
Equities Forwards & swaps 107 132 23%
Other Options 288 460 60%
Equities Forwards & swaps 280 377 35%
Total 8 590 10 177 18%
Source : Bank for International Settlements
Stock options
In 2008, the growth rate of trading volumes was still very high, although it was half as compared to the
exceptional year of 2007 (17% against 34%). However, the contrast is striking between the growth rate
of the first three quarters and year-end, and between the growth rates across countries. Before the
announcement of Lehman Brothers’s bankruptcy, the volumes were already on a path of slower
growth than in 2007, especially in Europe. They soared in September, but then slumped on all
Asian/Pacific exchanges from October and in other regions in November. To date they have failed to
show an upturn.
IOMA Derivatives Market Survey 2008 – May 2009 13
Annual growth rate of stock options volume
70%
60% Americas
Asia - Pacific
50%
Europe - Africa - Middle East
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
The United States continue to dominate the stock options market with the four most active exchanges
in the world (ISE, CBOE, NASDAQ OMX PHLX and NYSE Arca Options). Trading on individual
equities and especially ETFs has continued to grow rapidly. 300 millions options on ETFs were traded
on ISE (+62%) and 330 millions on CBOE. At the same time, data available from CBOE shows that
the open position at the end of the year remained stable, which implies an increase in the velocity of
trading for these contracts, probably due to the development of programme trading. On average, the
open position in options on ETFs rotated in 1.6 months against 2.5 months in 2005. Options on ETFs
tend to become substitutable trading tools to index options. For instance, the 97 millions options on
S&P 500 ETF traded in 2008 on CBOE (many of them emanating from electronic algorithmic trading
by hedge funds) represented an increase of 97% over 2007, while volumes of S&P 500 index options
traded on the same exchange grew by “only” 13%.
An additional trend in 2008 was the rise of options on sector ETFs. The options on the financial sector
SPDR became the third most active option on ETFs on CBOE (25.9 million traded options, i.e. almost
four times more than in 2007). In June 2008, options were launched on the SPDR Gold Trust ETF, an
ETF holding physical gold listed on the NYSE and which is one of the biggest ETFs in the United
States in terms of assets under management.
In South America, BM&FBOVESPA declined slightly but Petrobas PN options remain the most actively
traded stock options in the world with 210 million contracts traded in 2008 against 279 million in 2007.
IOMA Derivatives Market Survey 2008 – May 2009
14
In Europe, Athens Exchange has experienced the strongest growth of any exchange in the world.
MEFF and Johannesburg Stock Exchange have continued to grow rapidly. The growth of Eurex was
somewhat slower (9%) but this exchange consolidated its leading position in Europe, while other
exchanges in that region (including the second biggest, NYSE Liffe) either stabilised or declined.
Stock option trading in Asia-Pacific is still dominated by Hong Kong Exchanges & Clearing, despite a
very severe downturn after the Lehman bankruptcy. The National Stock Exchange of India and Osaka
Stock Exchange increased their volumes by approximately one fifth, but ASX, TAIFEX and Tokyo
Stock Exchange declined.
2008/2007 % Change in stock options volume
-100% -75% -50% -25% 0% 25% 50%
Athens Derivatives (2) 71%
Boston Options Exchange (1) 37%
NASDAQ OMX PHLX 35%
MEFF 35%
CBOE (1) 31%
ISE (1) 25%
Johannesburg SE 25%
NYSE Arca Options (1) 24%
National Stock Exchange of India 22%
Osaka SE 20%
Hong Kong Exchanges (1) 19%
Montréal Exchange (1) 17%
Eurex (1) 9%
NYSE Liffe (European markets) -1%
Borsa Italiana -2%
BM&FBOVESPA (1) -5%
NYSE Amex (1) -12%
Oslo Børs -18%
Wiener Börse -18%
Australian SE (1) -28%
NASDAQ OMX Nordic Exchanges -28%
TAIFEX -33%
Tokyo Stock Exchange Group -39%
Buenos Aires SE -52%
Korea Exchange -80%
ALL EXCHANGES 17%
(1) Including options on ETF (2) REPOs not included
IOMA Derivatives Market Survey 2008 – May 2009 15
Stock options contract volume Stock options notional value
Other exchanges Other exchanges 0,059
0,052
2007 2008 2007
NASDAQ OMX Nordic National Stock Exchange of India 0,085
Exchanges
0,051 2008
Hong Kong Exchanges (1) NYSE Amex (1) 0,080
0,056
Boston Options Exchange (1) Montréal Exchange (1) 0,099
0,075
NYSE Liffe (European markets) Borsa Italiana 0,148
0,113
NYSE Amex (1) Hong Kong Exchanges (1) 0,339
0,183
Eurex (1) NASDAQ OMX PHLX 0,163
0,226
BM&FBOVESPA (1) Australian SE (1) 0,605
0,262
NYSE Arca Options (1) NYSE Liffe (European markets) 0,954
0,759
NASDAQ OMX PHLX BM&FBOVESPA (1) 1,056
0,855
CBOE (1) Eurex (1) 1,604
1,524
International Securities Exchange CBOE (1) 4,924
(ISE) (1)
5,125
Millions 0 200 400 600 800 1 000 USD trillions 0 1 2 3 4 5 6
(1) Including options on ETF (2) REPOs not included
NB: Notional values are not available for the Boston Options Exchange, Buenos Aires Stock Exchange, ISE, NASDAQ OMX Nordic Exchanges,
NYSE Arca Options, Osaka Stock Exchange and Tokyo Stock Exchange.
Stock options volume by geographical zone
4 000
2007
3 500 2008
3 000
2 500
Millions
2 000
1 500
1 000
500
0
Americas Asia Pacific Europe, Africa, Middle
East
IOMA Derivatives Market Survey 2008 – May 2009
16
The most actively traded stock options in the world
Millions of Market Opt. Prem.
Underlying equity Exchange contracts share billion $
2008 2007 2008 2007 2008 2007
Petrobras PN BM&FBOVESPA 210,2 279,1 4,8% 7,5% 14,5 13,8
Vale R Doce PNA BM&FBOVESPA 130,0 79,7 3,0% 2,1% 6,9 5,5
S&P 500 ETF Options CBOE 96,9 49,2 2,2% 1,3% 27,7 14,9
SPY ISE 81,2 37,0 1,9% 1,0% NA NA
iShares Russell 2000 ETF Options CBOE 72,7 75,8 1,7% 2,0% 20,8 22,9
PowerShares QQQ ETF Options CBOE 61,2 43,2 1,4% 1,2% 17,5 13,1
Allianz Eurex 54,0 41,6 1,2% 1,1% 9,1 5,5
PowerShares QQQ ETF Options ISE 49,0 57,3 1,1% 1,5% NA NA
S&P 500 ETF Options NYSE Arca Options 41,4 NA 0,9% NA NA NA
iShares Russell 2000 ETF Options ISE 40,3 42,7 0,9% 1,1% NA NA
Deutsche Telekom Eurex 31,9 30,9 0,7% 0,8% 6,2 3,3
PowerShares QQQ ETF Options NYSE Arca Options 30,6 NA 0,7% NA NA NA
Financial Select Sector SPDR CBOE 25,9 6,8 0,6% 0,2% 7,4 2,0
ING NYSE Liffe 23,2 16,0 0,5% 0,4% 7,3 4,8
Münchener Rückversicherung Eurex 22,0 19,5 0,5% 0,5% 2,8 1,5
S&P 500 ETF Options NYSE Amex 21,2 14,5 0,5% 0,4% NA NA
Citigroup Inc. ISE 20,9 NA 0,5% NA NA NA
Apple Inc. ISE 20,1 NA 0,5% NA NA NA
PowerShares QQQ ETF Options NYSE Amex 20,1 22,3 0,5% 0,6% NA NA
Nokia Eurex 17,3 16,4 0,4% 0,4% 3,5 2,7
Ericsson B NASDAQ OMX Nordic 17,3 35,1 0,4% 0,9% NA NA
Deutsche Bank Eurex 16,2 11,8 0,4% 0,3% 24,9 22,5
SAP Eurex 15,6 17,5 0,4% 0,5% 1,9 1,6
Financial Select Sector SPDR NYSE Arca Options 15,5 NA 0,4% NA NA NA
iShares Russell 2000 ETF Options NYSE Arca Options 14,2 NA 0,3% NA NA NA
Fortis NYSE Liffe 14,0 7,5 0,3% 0,2% 3,9 1,9
iShares MSCI Emerging Markets Index CBOE 13,7 7,8 0,3% 0,2% 3,9 2,4
Daimler Eurex 13,7 0,0 0,3% 0,0% 22,3 0,0
XLF NYSE Amex 13,4 6,7 0,3% 0,2% NA NA
UBS Eurex 12,9 7,7 0,3% 0,2% 6,7 3,1
Royal Dutch Shell NYSE Liffe 12,6 12,7 0,3% 0,3% 3,2 2,5
Apple Inc. NYSE Arca Options 11,0 NA 0,3% NA NA NA
Microsoft Corp. ISE 10,6 NA 0,2% NA NA NA
Yahoo! Inc. ISE 10,6 NA 0,2% NA NA NA
Diamonds Trust, Series 1 CBOE 10,4 8,0 0,2% 0,2% 3,0 2,4
IOMA Derivatives Market Survey 2008 – May 2009 17
Stock futures
In 2008, the stock futures market continued to grow more rapidly than other segments of the
derivatives market. The annual growth rate in 2008 was 66% after having doubled in 2007.
This market remains located in the Europe-Africa region and in the Asia-Pacific region. In North
America the only exchange proposing this class of products for trading is OneChicago where trading
fell by a half in 2008 compared to 2007.
Johannesburg Stock Exchange retained its leading position in terms of number of contracts traded.
Eurex became the third most active exchange in the world in terms of traded volumes, and the second
one in terms of notional value exchanged. NYSE Liffe was again very successful in attracting OTC
trades in stock futures to its OTC registration system BClear. MEFF and NASDAQ OMX Nordic
Exchanges also experienced very rapid growth.
In Asia, the National Stock Exchange of India remains the most active exchange in the world in terms
of notional value while other exchanges are developing rapidly. The case of the Australian Securities
Exchange is especially impressive, where volumes quadrupled, thus propelling it to become the fifth
largest exchange in the world for this group of products. A new player appeared in May, the Korea
Exchange, which already recorded 12 million contracts in 8 months.
Annual growth rate of stock futures volume
140%
120% Asia - Pacific
100% Europe - Africa - Middle East
80%
60%
40%
20%
0%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
-20%
IOMA Derivatives Market Survey 2008 – May 2009
18
2008/2007 % Change in stock futures volume
-125% -100% -75% -50% -25% 0% 25% 50% 75% 100% 125% 150%
Australian SE (2) 423,3%
Warsaw SE 190,9%
Eurex (1) 148,2%
MEFF 117,1%
NASDAQ OMX Nordic Exchanges 75,8%
NYSE Liffe (European markets) 65,4%
Johannesburg SE 58,6%
Athens Derivatives Ex. 39,7%
National Stock Exchange of India 25,9%
Wiener Börse -20,3%
Budapest SE -23,9%
Hong Kong Exchanges -26,9%
Borsa Italiana -30,6%
Oslo Børs -33,0%
OneChicago (1) -53,0%
Bombay Stock Exchange -99,6%
ALL EXCHANGES 66,0%
(1) Including futures on ETF (2) Including single stock CFDs
Stock futures contract volume Stock futures notional value
Other Ex. 13
Other Ex. 7
2007
2007
Korea Exchange 0
Korea Exchange 2008 6
2008
Athens Derivatives Ex. 7
NASDAQ OMX Nordic 6
Exchanges
Budapest SE 13
7
MEFF
Borsa Italiana 63
32
Australian SE (2)
Johannesburg SE 50
42
NYSE Liffe (European
markets) 56
MEFF 90
Eurex (1) NYSE Liffe (European 382
markets) 501
National Stock Exchange of
India 234
Eurex (1) 628
Johannesburg SE NSE India 1 683
1 001
Millions
- 100 200 300 400 USD Billion
0 500 1 000 1 500 2 000
(1) Including futures on ETF (2) Including single stock CFDs
NB: Notional values are not available for OneChicago.
IOMA Derivatives Market Survey 2008 – May 2009 19
Stock futures contract volume by geographical zone
800
700 2007
2008
600
500
Millions
400
300
200
100
0
Americas Asia Pacific Europe, Africa, Middle East
Index options
The index options market had a very mixed year in 2008 and early 2009. After an extraordinary year in
2007 (+38% excluding figures for Korea), the market grew again although at a slower pace in Europe.
It declined slightly in the Americas and in Asia over the first eight months, before Lehman Brothers’
bankruptcy. The sharp increase in market volatility translated into exceptional volumes of trading in
September and October. However, the liquidity crisis of the interbank market dried up the market at
year’s end and in February 2009 volumes were still lower than in the previous year, except in Asia.
IOMA Derivatives Market Survey 2008 – May 2009
20
Annual growth rate of index options volume
100%
Americas
80% Asia/Pacific
Europe/Africa/Mid. East
60%
40%
20%
0%
-20%
-40%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
In total over the year 2008, exchanged volumes increased by 9%, all regions included. As in previous
years, the weight of Korea is still predominant, although it declined slightly from 72% to 68%.
Excluding figures for Korea, the annual growth amounted to 27%. KOSPI 200 options volumes rose
2% in 2008 (against 12% in 2007) and reached 2 766 million contracts.
In Europe, Eurex remained the most active exchange by far. Its flagship product, the Dow Jones Euro
STOXX 50 options, has remained on a strong upward trend, with 401 million contracts traded, an
increase of 59%, following rises of 68% in 2007 and +65% in 2006. Other contributors to the growth of
the exchange were the 105 million traded DAX options (+14%) and the European sectoral index
options (2 million contracts, +61%).
In Europe, MEFF also had a very active year on the mini IBEX options (+46%). On NYSE Liffe, the
picture was mixed: the FT100 index options became the first index option contract traded on this
exchange (29 million contracts, +23% over 2007) ahead of the Dutch AEX and the French CAC 40
which decreased slightly. All other exchanges in the Europe, Africa and Middle East region recorded
lower volumes of trading in 2008 than in 2007. However, the Tel Aviv Stock Exchange, with 81 million
contracts, retained its sixth position worldwide.
In the Americas, trading in index options stabilised or decreased slightly in 2008, except during the
months of September and October. In February 2009, trading volumes were still lower than the
previous year. However, the exceptional activity of September and October allowed most North
American exchanges (except NYSE Amex) to record a positive growth in 2008 over 2007. Moreover,
IOMA Derivatives Market Survey 2008 – May 2009 21
one should take into account that more and more option trades are based on index ETFs, included in
the single equity options statistics in the present survey (see above). CBOE remains the second
exchange in the world for the notional value of index options exchanged, behind the Korea exchange
but ahead of Eurex. The flagship S&P 500 contract recorded 179 million contracts traded (+13%), and
the Russel 2000 took the second position, with a volume that more than doubled. CME Group also
kept its fourth position worldwide in terms of notional value.
In South America, BMF&BOVESPA continues to grow rapidly.
In the Asia Pacific region, the most remarkable trend, apart from the performance of the KOSPI
options already mentioned, is the rise of the National Stock Exchange of India, whose business on
index options almost tripled for the second successive year and reached 150 million contracts traded.
With 98 million contracts, TAIFEX confirms its third position in that region. The Nikkei 225 options
traded on the Osaka Securities Exchange grew 10% and the number of trades on that contract
increased markedly, up 71%. In the first two months of 2009, trading in Nikkei 225 options slowed
down.
Overall, the concentration of index option trading on main underlying indexes increased again: the top
ten index options after KOSPI 200 options accounted for 87% of the global index options trading in
2008 (excluding the KOSPI index) against 82% in 2007.
IOMA Derivatives Market Survey 2008 – May 2009
22
2008/2007 % Change in index option volume
-100% -50% 0% 50% 100%
Thailand Futures Exchange (TFEX) 428%
Tokyo Stock Exchange Group 217%
National Stock Exchange of India 186%
ICE Futures U.S. 92%
MEFF 46%
Montréal Exchange 46%
Eurex 46%
BM&FBOVESPA 30%
ISE 14%
CBOE 13%
Australian SE 13%
Osaka SE 10%
CME Group 8%
NYSE Liffe (European markets) 6%
Korea Exchange 2%
TAIFEX 1%
NASDAQ OMX Nordic Exchanges 0%
Borsa Italiana -1%
Tel Aviv SE -14%
Warsaw SE -14%
Johannesburg SE -17%
Bombay Stock Exchange -19%
NASDAQ OMX PHLX -21%
Oslo Børs -21%
Wiener Börse -28%
Athens Derivatives Exchange -30%
Hong Kong Exchanges -40%
Singapore Exchange -43%
NYSE Amex -46%
MexDer -60%
Budapest SE -100%
ALL EXCHANGES 9%
IOMA Derivatives Market Survey 2008 – May 2009 23
Index options contract volume Index options notional value
Other Ex. 63 Other Ex.
51 2007
2007
International Securities Exchange 16 2008
(ISE) 18 2008
TAIFEX
NASDAQ OMX Nordic Exchanges 20
20
Osaka SE 29
32 Tel Aviv SE
CME Group 41
44
NYSE Liffe (European markets)
NYSE Liffe (European markets) 63
67
Tel Aviv SE 94
81 CME Group
TAIFEX 97
98
2
Eurex
National Stock Exchange of India 53
151
CBOE 231
259 CBOE
Eurex 353
515
63.3 Tril
2710 Korea Exchange
Korea Exchange 42.7 Tril
2766
Millions 0 100 200 300 400 500 USD trillions 0 5 10 15 20 25 30
NB: Notional values are not available for the BMF&BOVESPA, ICE Futures US, ISE, Osaka Stock Exchange and Singapore Exchange.
Index options contract volume by geographical zone
3 500
2007 2008
3 000
2 500
2 000
Millions
1 500
1 000
500
0
Americas Asia Pacif ic Asia Pacif ic Excl. Korea Europe, Af rica, Middle East
IOMA Derivatives Market Survey 2008 – May 2009
24
The most actively traded index options in the world
Millions of Market share Opt. Prem.
Underlying Index Exchange contracts in 2008 billion $
2008 2007 Total Ex. Korea 2008 2007
Kospi 200 Korea Exchange 2 766 2 710 67,9% 211,1% 257,9 235,2
Euro Stoxx 50 Eurex 400,9 251,4 9,8% 30,6% 740,8 392,7
S&P 500 CBOE 179,1 158,1 4,4% 13,7% 621,3 349,8
S&P CNX Nifty Index NSE India 150,9 52,7 3,7% 11,5% 17,1 6,3
DAX Eurex 104,9 91,9 2,6% 8,0% 133,7 93,9
TAIFEX TAIFEX 92,8 92,6 2,3% 7,1% NA NA
TA 25 Tel-Aviv SE 81,4 94,3 2,0% 6,2% 3,1 3,0
S&P 500 and E-MINI S&P 500 CME Group 38,5 35,7 0,9% 2,9% NA NA
Nikkei 225 Osaka SE 32,1 29,2 0,8% 2,5% 48,6 28,4
FTSE 100 (incl. Index FLEX Options) NYSE Liffe 30,7 24,7 0,8% 2,3% 90,7 63,5
AEX NYSE Liffe 27,5 28,4 0,7% 2,1% 33,5 28,0
Volatility Index Options CBOE 26,0 23,4 0,6% 2,0% 5,2 3,4
Index futures
The growth of index futures trading decreased in 2008, but less markedly than for other equity
derivatives. For the whole year the annual growth rate of the number of contracts traded amounted to
34%, in contrast to 45% in 2007 and 32% in 2006. Trading in index futures continued to grow very
rapidly until October 2008, especially in the Americas and in Asia-Pacific. It remained vibrant in Asia
until the end of the year. But from November 2008, the growth of trading was interrupted on a majority
of exchanges.
IOMA Derivatives Market Survey 2008 – May 2009 25
Annual growth rate of index futures volume
120%
Americas
100%
Asia - Pacific
80% Europe - Africa - Middle East
60%
40%
20%
0%
-20%
-40%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
In the United States, the merger of CME and CBOT has further strengthened the dominant position of
the first actor, the CME Group, with a market share of 95% in the United States and 39% in the world.
ICE Futures US, the second exchange offering index futures in the United States attained a market
share of 2% in the United States. Other exchanges in the Americas recorded mixed figures, with
OneChicago, Montréal Exchange and Mexder growing, while BM&FBOVESPA suffered a 24%
decrease in trading.
In Europe, Eurex again increased its market share, thanks to the Dow Jones Euro STOXX 50 futures
which accounted for 85% of the recorded volumes on that exchange. Futures on the SMI also grew
significantly, while the DAX future declined slightly. Some sectoral indices have also shown increased
trading. For example, the Dow Jones STOXX 600 Banks Future ranks as the fourth most actively
traded contract on Eurex.
The second most active exchange in the region, namely NYSE Liffe, increased 14%. The most active
contract remains the CAC 40, but the most significant progression is observed on the FTSE 100.
Contracts on the BEL 20 and the AEX indices were stable, while the Portuguese PSI declined. It is
interesting to note that the number of trades is increasing faster than the number of contracts traded,
pushed up by automatic trading. For example, the number of trades on the FTSE100 increased 82%
whereas the number of traded contracts increased 26%. The average number of contracts per trade
obviously diminished correlatively. In 2008 each trade was based on 1.6 contracts on the AEX, on
average, and 2.3 contracts on the FTSE 100 and the CAC 40.
IOMA Derivatives Market Survey 2008 – May 2009
26
Several smaller exchanges in the Europe, Africa, Middle East region also performed very well in 2008.
The Turkish Derivatives Exchange recorded more than 40 million contracts traded – although the
notional value of those contracts is still relatively low. Oslo Børs almost doubled its recorded volumes.
NASDAQ OMX Nordic exchanges, Warsaw Stock Exchange and Borsa Italiana also grew.
In Asia, The National Stock Exchange of India (NSEI) continues to be very successful with a number
of contracts traded that rose 46% and a number of trades that almost doubled over 2007. In contrast,
activity on the Bombay Stock exchange diminished and is only marginal when compared to the NSEI.
The Osaka Securities Exchange recorded a strong increase (+65%) in the number of contracts traded
and in the number of trades which doubled over the year. This trend is mainly due to the Nikkei 225
Mini, a contract for which retail trading represents as much as 39% of total trading. Again in 2009, the
Nikkei 225 Mini has grown significantly, while the Nikkei 225 (for which retail trading accounts for 13%)
registered a significant slowdown in January and February.
TAIFEX, the Thailand Futures Exchange (TFEX) and the Singapore Exchange were among the
exchanges with the highest speed of growth for index futures trading in the world. In Korea, futures on
the KOSPI 200 are not as predominant as options on the global derivatives landscape, but they grew
by almost 40% over 2007.
On the Hong Kong Exchanges and Clearing, traded contracts increased 37%, while the number of
trades increased 54%. It should be noted that the strongest increase recorded was for the Mini Hang
Seng index future, a contract predominantly traded by retail investors.
IOMA Derivatives Market Survey 2008 – May 2009 27
2008/2007 % Change in index futures volume
-100% -50% 0% 50% 100% 150%
ICE Futures U.S.
Turkish Derivatives Exchange 137%
Oslo Børs 92%
TAIFEX 90%
Thailand Futures Exchange (TFEX) 71%
Wiener Börse 67%
Osaka SE 65%
Tel Aviv SE 50%
Singapore Exchange 49%
National Stock Exchange of India 46%
OneChicago 40%
Korea Exchange 39%
Hong Kong Exchange 37%
CME Group 33%
Eurex 28%
Warsaw SE 26%
NASDAQ OMX Nordic Exchanges 24%
Australian SE 23%
Montréal Exchange 21%
Borsa Italiana 16%
Tokyo Stock Exchange Group 16%
MexDer 14%
NYSE Liffe (European markets) 14%
Athens Derivatives 3%
CBOE 2%
Johannesburg SE -5%
MEFF -6%
Bursa Malaysia -7%
Budapest SE -9%
BM&FBOVESPA -24%
Bombay Stock Exchange -57%
ALL EXCHANGES 34%
IOMA Derivatives Market Survey 2008 – May 2009
28
Index futures contract volume Index futures notional value
Other Ex.
Other Ex. 2007
2007
Johannesburg SE
ICE Futures U.S. 2008
2008
Johannesburg SE BM&FBOVESPA
Tokyo Stock Exchange Group Montréal Exchange
BM&FBOVESPA National Stock Exchange of India
Australian SE TAIFEX
TAIFEX
Borsa Italiana
NASDAQ OMX Nordic Exchanges
MEFF
Turkish Derivatives Exchange
Australian SE
Hong Kong Exchange
Tokyo Stock Exchange Group
Singapore Exchange
Korea Exchange Hong Kong Exchange
NYSE Liffe (European markets) Osaka SE
Osaka SE Korea Exchange
National Stock Exchange of India NYSE Liffe (European markets)
Eurex
Eurex
CME Group
CME Group
Millions 0 200 400 600 800
USD trillions 0 10 20 30 40 50 60
NB: Notional values are not available for ICE Futures U.S., NASDAQ OMX Nordic Exchanges, OneChicago and Singapore
Exchange.
Index futures volume by geographical zone
1 000
900 2007 2008
800
700
600
Millions
500
400
300
200
100
0
Americas Asia Pacific Europe, Africa, Middle East
IOMA Derivatives Market Survey 2008 – May 2009 29
B – Interest rate products
Trading in all types of interest rate products diminished in 2008, especially in futures.
Overall, traded volumes are down 14%, the largest decline being on short term interest rate
futures (-18%), but this is largely due to a specific event on Mexder where a short term interest
rate contract has been replaced by a long term one. Regardless of Mexder, the trend on long
term interest rate futures would be less negative (-9%) than on other contracts. Long term interest
rate futures decline is in line with the overall trend of interest rate products (-14%), while options
are a little less affected (- 6% for short term and -9% for long term products).
Interest rate products volume growth (billion contracts)
1,6 0,8
STIR futures
1,4 0,7
LTIR futures
1,2 STIR options 0,6
1,0 LTIR options 0,5
Futures
Options
0,8 0,4
0,6 0,3
0,4 0,2
0,2 0,1
0,0 0,0
2002 2003 2004 2005 2006 2007 2008
IOMA Derivatives Market Survey 2008 – May 2009
30
STIR options and futures
The global volume recorded fell 6% for STIR option trading and 18% for futures in 2008.
The global concentration of markets remained extremely strong in 2008. 95% of options were traded
on the CME Group or NYSE Liffe, while the market share of those two markets on futures rose from
64% to 76%.
On NYSE Liffe, all options grew strongly, the Euribor (+44%) more than the Three Month Sterling. The
Three Month Sterling Mid Curve tripled and reached 12 million contracts traded. As for futures, a
decline was observed on the Three Month EuroSterling and the Three Month EuroSwiss options, while
Euribor futures were stable compared to 2007.
With regards to the CME Group, most trading is concentrated on the Eurodollar futures which remain
the most active STIR contract in the world (597 million contracts) despite a slight decrease in 2008.
Eurodollar options are also the most active STIR options globally, but a sharp decrease of 27% was
recorded in 2008.
In the Americas, the sharp decrease in the number of futures traded on Mexder is due to the
introduction at end of 2007 of a substitutable long term interest rate product, the 10-year interest rate
swap future (see below).
Both STIR options and futures are also traded on BM&FBOVESPA and Bourse de Montréal and they
were generally less active in 2008 than in 2007, except for options on BM&FBOVESPA.
All other exchanges where STIR options are traded declined except on NASDAQ OMX where 17
million futures were traded.
IOMA Derivatives Market Survey 2008 – May 2009 31
a) STIR options
2008/2007 % Change in STIR options volume
-100% -75% -50% -25% 0% 25% 50%
BM&FBOVESPA 49,5%
NYSE Liffe (European markets) 37,8%
NASDAQ OMX Nordic Exchanges -8,2%
CME Group -27,0%
Montréal Exchange -62,3%
Australian SE -62,9%
Tokyo Financial Exchange -65,8%
CBOE -71,8%
Singapore Exchange -96,1%
ALL EXCHANGES -6,3%
STIR options contract volume STIR options notional value
Other Exchanges 2
0,655
1 2007 Australian SE 2007
0,241
1 2008 2008
NASDAQ OMX Nordic Exchanges
1
0,703
Montréal Exchange
Tokyo Financial Exchange Inc. 4 0,263
1
14 313
BM&FBOVESPA
21 CME Group
229
NYSE Liffe (European markets) 136
187
166
NYSE Liffe (European
313 markets) 234
CME Group
229
Millions0 100 200 300 USD trillions
0 100 200 300
NB: Notional values are not available for CBOT, OMX, Singapore Exchange and Tokyo Financial Exchange for 2006.
IOMA Derivatives Market Survey 2008 – May 2009
32
STIR options contract volume by geographical zone
350
300 2007 2008
250
Millions
200
150
100
50
-
Americas Asia Pacific Europe, Africa, Middle East
b) STIR futures
2008/2007 % Change in STIR futures volume
-80% -60% -40% -20% 0% 20% 40%
TAIFEX
NASDAQ OMX Nordic Exchanges 12%
NYSE Liffe (European markets) -3%
CME Group -4%
Eurex -11%
Australian SE -12%
Bursa Malaysia -18%
Hong Kong Exchanges -23%
BM&FBOVESPA -25%
Montréal Exchange -35%
Tokyo Financial Exchange -43%
Singapore Exchange -71%
MexDer -72%
ALL EXCHANGES -18%
IOMA Derivatives Market Survey 2008 – May 2009 33
STIR futures contract volume STIR futures notional value
Other exchanges 2007 2,0
MexDer 2007
0,5
2008
2008
NASDAQ OMX Nordic Exchanges
1,0
Eurex
1,0
Tokyo Financial Exchange
10,0
BM&FBOVESPA
7,9
Australian SE
14,3
Montréal Exchange
9,3
MexDer
28,4
Australian SE
BM&FBOVESPA 24,1
NYSE Liffe (European 435,5
NYSE Liffe (European markets) markets) 437,9
625,7
CME Group CME Group
598,9
Millions 0 100 200 300 400 500 600 USD trillions0 200 400 600
NB: Notional values are not available for NASDAQ OMX Nordic Exchanges, Singapore Exchange and Tokyo Financial
Exchange.
STIR futures contract volume by geographical zone
1 200
2007
1 000
2008
Millions
800
600
400
200
-
Americas Asia Pacific Europe, Africa, Middle East
IOMA Derivatives Market Survey 2008 – May 2009
34
LTIR options and futures
As for short term interest rate derivatives, the trading of long term interest rate derivatives declined in
2008. Both options and futures volumes diminished, often dramatically, in the three regions.
Europe and Americas had resisted until Lehman Brother’s collapse. But the growth stopped suddenly
in September 2008. It became negative in October in Americas and in December in Europe.
Annual growth rate of long term interest rate options volume
80%
60% Americas
Europe/Africa/Mid. East
40%
20%
0%
-20%
-40%
-60%
-80%
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
As far as bond futures are concerned, the picture is even worse. All regions were already on a
negative trend before the crisis, in Europe less than in other regions, but then volumes collapsed
everywhere, including in Europe as a consequence of the inter-bank liquidity crisis.
IOMA Derivatives Market Survey 2008 – May 2009 35
Annual growth rate of long term interest rate futures volume
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
-70%
Americas
-80%
Asia - Pacific
-90% Europe/Afr./ME
Jan-Aug 08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
Despite the decline in their activity, Eurex and CME Group still hold an overwhelming market share for
long term interest rate (LTIR) derivatives trading globally, amounting to 98% for options and 91% for
futures. The Euro-Bund futures on Eurex and the 10 year treasury note futures on CME keep their
leading position globally with an equivalent number of 257 million contracts being traded in each of
those contracts. In terms of notional value, options trading is even more concentrated, with CME
Group alone representing 81% of the global total.
Options traded declined 12% on Eurex and 12% on the CBOT list of CME Group, while futures
declined 15% and 13% respectively.
In the Americas, LTIR options are also traded on the Montréal Exchange, the Buenos Aires Stock
Exchange and CBOE. As in 2007, volumes increased in 2008 in Montréal Exchange. They decreased
on CBOE. As far as LTIR futures are concerned, volumes traded on other exchanges in the Americas
decreased in Montréal and on BM&FBOVESPA and increased sharply on MexDer.
The number of Mexder LTIR contracts traded more than doubled and the notional value of the
contracts tripled. This trend can be explained by the confirmed success of the 10-year bond (M10)
futures and by the introduction at end of 2007 of a new 10-year interest rate swap future which is a
substitute for the 120 maturities that institutional investors and market makers in the 28-days TIIE
futures had to roll (a transaction called “Engrapado” or Bundle). The launch of the swap futures
allowed for a reduction in the time-consuming use by the back office of market participants of the daily
settlement price on each maturity.
IOMA Derivatives Market Survey 2008 – May 2009
36
In the Europe-Africa-Middle East region, and apart from Eurex, a surge in the number of long term
interest rate futures was observed in Johannesburg in 2008 but the notional value was still very low.
Long term interest rate futures are also traded on NASDAQ OMX Nordic Exchanges with increasing
volumes and NYSE Liffe with a slowdown in 2008.
In the Asia-Pacific region, only two exchanges list LTIR options, namely the Tokyo Stock Exchange
and the Australian Securities Exchange: both of them saw volumes decrease in 2008. As for futures,
volumes traded declined sharply on the Australian exchange, but they rose on the Korea exchange,
which is now the second most active exchange on this category of products in Asia, behind ASX.
Volumes declined in Singapore and on the Tokyo Stock Exchange.
IOMA Derivatives Market Survey 2008 – May 2009 37
a) LTIR options
2008/2007 % Change in LTIR options volume
-70% -50% -30% -10% 10% 30% 50% 70% 90%
Johannesburg SE
Montréal Exchange 71%
CME Group -7%
Eurex -12%
Tokyo Stock Exchange Group -13%
Australian SE -39%
CBOE -65%
ALL EXCHANGES -9%
LTIR options contract volume LTIR options notional value
2,1
Australian SE 2007 0,2
1,3 Australian SE 2007
0,1
2008 2008
2,8
Tokyo Stock Exchange Group
2,4
11,9
Eurex
11,1
79
Eurex
69
49,9
105 CME Group
CME Group 46,7
98
Millions 0 20 40 60 80 100 120 USD trillions 0 10 20 30 40
NB: Notional values are not available for Buenos Aires Stock Exchange and Tokyo Stock Exchange.
IOMA Derivatives Market Survey 2008 – May 2009
38
LTIR options contract volume by geographical zone
120
2007
100
2008
80
Millions
60
40
20
0
Americas Asia Pacific Europe, Africa, Middle East
b) LTIR Futures
2008/2007 % Change in LTIR futures volume
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
Johannesburg SE 2240%
TAIFEX 212%
MexDer 159%
Korea Exchange 17%
NASDAQ OMX Nordic Exchanges 8%
MEFF 8%
Turkish Derivatives Exchange 5%
NYSE Liffe (European markets) -10%
BM&FBOVESPA -11%
CME Group -13%
Eurex -15%
Montréal Exchange -21%
Tokyo Stock Exchange Group -21%
Australian SE -25%
Singapore Exchange -43%
Bursa Malaysia -96%
Warsaw SE -100%
Hong Kong Exchanges -100%
ALL EXCHANGES -14%
IOMA Derivatives Market Survey 2008 – May 2009 39
LTIR futures contract volume LTIR futures notional value
3,0
Other exchanges
4,7
2007 1
0,3 Montréal Exchange
Johannesburg SE 0,69
2007
5,9
2008
9,3 2 2008
Montréal Exchange Korea Exchange
7,4 1,53
NASDAQ OMX Nordic 7,7
4
Exchanges 8,3 Australian SE
3,24
13,5
Tokyo Stock Exchange Group
10,6 NYSE Liffe (European 6
13,6 markets) 4,80
Korea Exchange
15,9
Tokyo Stock Exchange 12
28,8 Group
NYSE Liffe (European markets) 10,4
25,8
52,1 103
Australian SE Eurex
39,0 95
692,3
Eurex
588,7 CME Group
159
165
709,7
CME Group
615,3
USD trillions0 50 100 150 200
Millions 0 200 400 600
NB: Notional values are not available for Bursa Malaysia, Singapore Exchange, and NASDAQ OMX Nordic Exchanges.
LTIR futures contract volume by geographical zone
800
700 2007 2008
600
500
Millions
400
300
200
100
0
Americas Asia Pacific Europe, Africa, Middle East
IOMA Derivatives Market Survey 2008 – May 2009
40
C – Currency products
Currency derivatives remain a relatively small segment of organised derivatives markets. Their growth
slowed down in 2008 as compared to previous years but it was still rapid on the option segment
(+17%) and more moderate on futures (+4%).
Currency products volume growth (billion contracts)
0,6 0,06
Currency
0,5 futures 0,05
Currency
0,4 options 0,04
Options
Futures
0,3 0,03
0,2 0,02
0,1 0,01
0,0 0,00
2002 2003 2004 2005 2006 2007 2008
a) Currency options
The growth of the currency options volumes slowed down from 79% in 2007 to 17% in 2008. However,
these figures are heavily influenced by BM&FBOVESPA, the leading exchange in the world for this
category of products in terms of contract volume (the main product being U.S. Dollar options on
futures traded on BM&F markets). BM&FBOVESPA volumes rose 24% in 2008 but they had doubled
in 2007.
A surge in options trading has been observed on all exchanges in the United States: ISE, ICE Futures
and CME Group. Although the CME Group is still predominant in the US, ISE has been very
successful for its second year in trading currency options, with a growth rate of 141%.
In the Europe-Africa-Middle East region the most active exchange is the Tel Aviv Stock Exchange,
with 5,6 million contracts traded in 2008, an increase of 1,3 million over 2007. NYSE Liffe (European
markets) and Budapest Stock Exchange experienced declining activity in 2008.
There is no trading on currency options in the Asia-Pacific region at present.
IOMA Derivatives Market Survey 2008 – May 2009 41
2008/2007 % Change in currency options volume
-100% -75% -50% -25% 0% 25% 50% 75% 100%
International Securities Exchange (ISE) 141%
ICE Futures U.S. 44%
CME Group 29%
BM&FBOVESPA 24%
Tel Aviv SE 13%
NYSE Liffe (European markets) -9%
Budapest SE -28%
MexDer -30%
Montréal Exchange -32%
ALL EXCHANGES 17%
Currency options contract volume Currency options notional value
Budapest SE 0,6 Montréal 0,3
0,4 2007
2007 Exchange 0,2
NYSE Liffe (European 0,5 2008
markets) 0,4 2008 0,7
Budapest SE
0,6
International Securities 0,7
Exchange (ISE) 1,7 NYSE Liffe
6,6
(European
6,3
CME Group 4,3 markets)
5,6
92,7
Tel Aviv SE
Tel Aviv SE 9,7 119,5
11,0
24,7 596,1
BM&FBOVESPA CME Group
30.6 850.9
Millions 0 5 10 15 20 25 30 USD billions 0 100 200 300 400 500 600
NB: Notional values are not available for BM&FBOVESPA, ICE Futures U.S. and International Securities Exchange (ISE).
IOMA Derivatives Market Survey 2008 – May 2009
42
Currency options volume by geographical zone
40
35
2007 2008
30
25
Millions
20
15
10
5
0
Americas Europe, Africa, Middle East
b) Currency futures
Currency futures trading increased in 2008 for a majority of exchanges. The CME Group continues to
retain its dominant position on a global scale, even more in terms of notional value than of contract
volumes. In South America, both markets present in this segment – MexDer and BM&FBOVESPA -
were stable as compared to 2007. BM&FBOVESPA has retained its second position worldwide.
In Asia, the Tokyo Stock Exchange performed very well, with 43 million contracts traded. A newcomer,
the National Stock Exchange of India was able to record as much as 11 million contracts for its first
year of trading in this segment of the market. But the Korea Exchange is still much bigger in terms of
notional value traded. The Australian Securities Exchange is progressing rapidly.
Currency futures are less actively traded on organised exchanges in the Europe, Africa, and Middle
East region than in the other two. However volumes surged on some exchanges: in Warsaw, they
increased from 6 000 contracts in 2007 to 133 000 in 2008, despite a fall in liquidity at the end of the
year and market makers spreads three times wider at the end of the year than in September 2008.
The Turkish Derivatives Exchange increased its activity 80%, but the Budapest Stock Exchange
decreased 32%.
IOMA Derivatives Market Survey 2008 – May 2009 43
2008/2007 % Currency futures volume
-50% -25% 0% 25% 50% 75% 100%
Warsaw SE 2073%
Australian SE (1) 277%
Turkish Derivatives Exchange 80%
Tokyo Financial Exchange (2) 29%
ICE Futures U.S. (formerly NYBOT) 10%
Korea Exchange 10%
CME Group 9%
NYSE Liffe (European markets) 9%
MexDer 0%
BM&FBOVESPA -1%
Budapest SE -32%
ALL EXCHANGES 4%
(1) Including currency CFDs (2) Exchange Forex Margin contracts (Click 365)
IOMA Derivatives Market Survey 2008 – May 2009
44
Currency futures contract volume Currency futures notional value
18
Budapest SE 2007
Korea Exchange 2007 12
2008 National Stock Exchange of 0 2008
Budapest SE India 13
8
National Stock Exchange of Turkish Derivatives Exchange
15
India
32
Turkish Derivatives Exchange MexDer
33
313
Tokyo Financial Exchange (2) Korea Exchange
347
BM&FBOVESPA 4 289
BM&FBOVESPA
4 322
CME Group 17 358
CME Group
20 537
Millions 0 50 100 150 USD billions 0 5 000 10 000 15 000 20 000
NB: Notional values are not available for ICE Futures U.S. (formerly NYBOT), Rofex and Philadelphia Stock Exchange.
Currency futures volume contract by geographical zone
300
250
2007 2008
200
Millions
150
100
50
0
Americas Asia Pacific Europe, Africa, Middle East
IOMA Derivatives Market Survey 2008 – May 2009 45
D - Commodity derivatives
Commodity derivatives is the only segment of the market which continued its very rapid growth,
especially in the futures market (+ 38% in 2008 against 19% in 2007). In this class of underlyings,
futures are much more actively traded (1,5 billion contracts traded in 2008) than options (154 million
contracts).
Currency products volume growth (billion contracts)
0,6 0,06
Currency futures
0,5 0,05
Currency options
0,4 0,04
Options
Futures
0,3 0,03
0,2 0,02
0,1 0,01
0,0 0,00
2002 2003 2004 2005 2006 2007 2008
a) Commodity options
Commodity options are predominantly traded in the Americas, with the CME Group leading the global
scene for trading those products, followed by ICE Futures US, which is growing rapidly (+33%). In
South America, agricultural options are traded on BM&FBOVESPA and Mercado a Término de
Buenos Aires.
In Europe, the most active exchanges are the London Metal Exchange, with a stable activity in 2008
and NYSE Liffe followed by Johannesburg Stock Exchange and ICE Futures Europe.
In Asia-Pacific, there is only one exchange where commodity options are traded namely the Australian
Stock Exchange, whose activity more than doubled in 2008.
IOMA Derivatives Market Survey 2008 – May 2009
46
2008/2007 % Changes in commodity options volume
-50% -25% 0% 25% 50% 75% 100% 125%
Australian SE 139%
ICE Futures Europe 108%
BM&FBOVESPA 74%
ICE Futures U.S. 33%
CME Group 16%
NYSE Liffe (European markets) 13%
Johannesburg SE 8%
London Metal Exchange 2%
ICE Futures Canada -3%
Budapest SE -33%
Mercado a Término de Buenos Aires -42%
Tokyo Grain Exchange -100%
ALL EXCHANGES 16%
IOMA Derivatives Market Survey 2008 – May 2009 47
Commodity options contract volume Commodity options notional value
0,3
BM&FBOVESPA
0,5 2007
2007
0,8
0,3 Johannesburg SE
ICE Futures Europe 1,0 2008
0,6 2008
0,7
Johannesburg SE
0,7
Mercado a Término de Buenos 2,4
Aires 1,4 0,5
NYSE Liffe (European markets)
1,3 1,1
NYSE Liffe (European markets)
1,5
7,2
London Metal Exchange
7,4
13,0
ICE Futures U.S. 1,6
17,2 Australian SE
3,7
106,9
CME Group
124,4
Millions- 40 80 120 160 USD billion
0 1 2 3 4
NB: Notional values are not available for ROFEX, BM&FBOVESPA, CME Group, ICE Futures U.S., ICE Futures Canada,
Mercado a Término de Buenos Aires, ICE Futures Europe and London Metal Exchange
Commodity options contract volume by geographical zone
160
143,51
140
122,56
2007 2008
120
100
Millions
80
60
40
20 9,44 10,17
0,00 0,01
0
Americas Asia Pacific Europe, Africa, Middle East
IOMA Derivatives Market Survey 2008 – May 2009
48
b) Commodity futures
CME Group is still the most active market in the world for trading of commodity futures following the
acquisition of NYMEX and CBOT, but the growth of the market was driven by three major Chinese
exchanges: Dalian Commodity Exchange, Zhengzhou Commodity Exchange and Shanghai Futures
Exchange. For the first time, the Asia-Pacific region was the most active of the three regions for
trading commodity futures. Chinese markets are mainly focused on agricultural derivatives. But other
Asian exchanges have also emerged as major markets for metal derivatives. For example, the gold
futures contract traded on TAIFEX since December 2007 surged to more than 5 million in 2008,
representing a notional value worth nearly 60 billion dollars.
In Europe, ICE Futures Europe and the London Metal Exchange continued to grow rapidly whilst the
activity on NYSE Liffe remained stable.
2008/2007 % Change in commodity futures volume
-50% -25% 0% 25% 50% 75% 100%
Turkish Derivatives Exchange 24813%
TAIFEX 10844%
Korea Exchange 4292%
Australian SE 157%
Zhengzhou Commodity Exchange 139%
Dalian Commodity Exchange 69%
Shanghai Futures Exchange 64%
BM&FBOVESPA 50%
London Metal Exchange 23%
CME Group 19%
Budapest SE 18%
ICE Futures U.S. 16%
Johannesburg SE 10%
ICE Futures Europe 10%
Bursa Malaysia 8%
NYSE Liffe (European markets) 3%
ICE Futures Canada -4%
Mercado a Término de Buenos Aires -8%
RMX -22%
Central Japan Commodity Exchanges -50%
Tokyo Grain Exchange -57%
Singapore Exchange -100%
ALL EXCHANGES 38%
IOMA Derivatives Market Survey 2008 – May 2009 49
Commodity futures contract volume Commodity futures notional value
Australian SE
2007 0,0
Johannesburg SE Turkish Derivatives Exchange
0,1
Bursa Malaysia 2008 2007 2008
0,0
BM&FBOVESPA Korea Exchange
0,1
Central Japan Commodity… 0,0
Hong Kong Exchanges
ICE Futures Canada 0,3
TAIFEX 0,3
Budapest SE
Tokyo Grain Exchange 0,4
NYSE Liffe (European markets) 12,6
Australian SE
8,3
Mercado a Término de Buenos…
39,5
ICE Futures U.S. Johannesburg SE
42,6
London Metal Exchange
23,8
Shanghai Futures Exchange BM&FBOVESPA
43,9
ICE Futures Europe 3,9
TAIFEX
Zhengzhou Commodity… 59,6
Dalian Commodity Exchange 166,2
NYSE Liffe (European markets)
214,3
CME Group
Millions 0 100 200 300 400 500 600 0
USD billion 50 100 150 200 250
NB: Notional values are not available for Bursa Malaysia, Central Japan Commodity Exchange, CME Group, Dalian Commodity
Exchange, ICE Futures Canada, ICE Futures Europe, ICE Futures U.S., London Metal Exchange, Mercado a Término de
Buenos Aires, RMX, ROFEX, Shanghai Futures Exchange, Singapore Exchange, Tokyo Grain Exchange and Zhengzhou
Commodity Exchange.
Commodity futures contract volume by geographical zone
700
600 2007 2008
500
Millions
400
300
200
100
0
Americas Asia Pacific Europe, Africa, Middle East
IOMA Derivatives Market Survey 2008 – May 2009
50
Energy derivatives
As in previous years, most energy derivatives trading is concentrated on two exchanges, ICE Futures
and CME Group, following its acquisition of NYMEX.
Most active contracts are oil futures, traded on the two leading markets.
Energy derivatives are an example of successful registration and clearing of OTC trades by organised
markets and clearing houses. In 2008, 85 million derivatives registered on NYMEX were cleared via
Clearport (against 66 million in 2007).
The most actively traded energy options in the world
Millions of contracts
Name of the contract Exchange
2008 2007
Light sweet crude oil options on futures CME Group (Nymex) 35.2 28.4
European style natural gas options CME Group (Nymex*) 31.2 29.9
European style crude oil options CME Group (Nymex*) 3.6 1.9
Natural gas options on futures CME Group (Nymex) 2.3 5.1
Crude oil average price options CME Group (Nymex*) 2.2 1.4
Source: The Futures Industry Association - * Cleared via Clearport
The most actively traded energy futures in the world
Millions of contracts
Name of the contract Exchange
2008 2007
Light sweet crude oil futures CME Group (Nymex) 134.7 121.5
Brent crude oil futures ICE Futures Europe 68.4 59.7
WTI crude oil futures ICE Futures Europe 51.1 51.4
Natural gas futures CME Group (Nymex) 38.7 29.8
Henry hub natural gas swap futures CME Group (Nymex*) 31.4 16.2
Fuel oil futures SHFE 30.8 12.0
Gas oil futures ICE Futures Europe 28.8 24.5
NY harbor RBOB gasoline futures CME Group (Nymex) 20.5 19.8
Crude oil futures MCX 20.5 13.9
No. 2 heating oil futures CME Group (Nymex) 19.6 18.1
Henry hub penultimate swap futures CME Group (Nymex*) 12.4 10.1
Source: The Futures Industry Association - * Cleared via Clearport
IOMA Derivatives Market Survey 2008 – May 2009 51
Metal derivatives
The metal derivatives market was very dynamic in 2008. Gold derivatives were especially actively
traded on the electronic platform Globex of CME Group (NYMEX) and in Asia (in Shanghaï and in
Taïwan as already mentioned)
Among exchanges that gained a higher ranking in the list of most actively traded contracts, the
Shanghai Futures Exchange’s gold and copper contracts rose to fourth and fifth positions respectively.
The most actively traded metal futures in the world
Millions of contracts
Name of the contract Exchange
2008 2007
High grade primary aluminium futures LME 48.3 40.2
Gold futures CME Group (Nymex) 38.4 25.1
Copper futures LME 26.5 21.4
Gold futures SHFE* 22.2 NA
Copper futures SHFE 20.8 16.3
Special l high grade zinc futures LME 16.1 12.6
Gold futures Tocom 15.2 18.2
Source: The Futures Industry Association - * Began trading gold futures in January 2008.
Agricultural derivatives
Agricultural derivatives are the most actively traded commodity derivatives and it was also the most
dynamic market in 2008 with a growth rate of 38.7%, which was slightly higher than the growth rate of
metal derivatives.
Two products, namely white sugar futures traded on ZCE and soybean futures traded on DCE,
experienced an impressive surge of their volumes in 2008 thereby placing them respectively first and
second for the most actively traded agricultural derivatives.
As already mentioned in previous IOMA derivatives surveys, agricultural derivatives markets remain
less developed in Europe than in the Americas and Asia as the Common Agricultural Policy protects
producers against price falls.
IOMA Derivatives Market Survey 2008 – May 2009
52
The most actively traded agricultural options in the world
Millions of contracts
Name of the contract Exchange
2008 2007
Corn options on futures CME Group (Prev CBOT) 21.0 14.7
Soybeans options on futures CME Group (Prev CBOT) 9.8 8.2
Sugar #11 ICE Futures U.S. 9.2 5.5
Source: The Futures Industry Association
The most actively traded agricultural futures in the world
Millions of contracts
Name of the contract Exchange
2008 2007
White sugar futures ZCE 165.5 45.5
No. 1 Soybean futures DCE 113.7 47.4
Soy meal futures DCE 81.3 64.7
Corn futures CME Group (Prev CBOT) 60.0 54.5
Corn futures DCE 55.0 59.4
Rubber futures SHFE 46.5 42.2
Soy oil futures DCE 43.7 13.3
Soybean futures CME Group (Prev CBOT) 36.4 31.7
Source: The Futures Industry Association
IOMA Derivatives Market Survey 2008 – May 2009 53
Gathering statistics on retail trading
Like last year, exchanges were asked about the share of retail investors in trading activity. The table
below summarizes answers received. Very few changes were observed compared to 2007. Equity and
index options are usually traded more by private investors than futures. However, several exchanges
(MEFF, Singapore Exchange and Osaka Stock Exchange) succeeded in attracting significant interest
from retail investors in futures contracts.
Exchange Share of retail trading (2008) Share of retail trading (2007)
BMF 8% 7%
BOVESPA 63% (options) 60% (options)
Montréal Exchange Equity and ETF options: significant Options: 98%
futures: insignificant Futures: 0%
CBOE 25% to 35% 25% to 35%
ISE Approximatly 50%
NYSE Arca 30%
Hong Kong Exchange 17% 18%
Osaka Stock Exchange Equity options put: 17%; Index futures: 18%
Equity options call: 13% Index options: 17-18%
Singapore Exchange negligible
TAIFEX 39%
Thailand Futures Exchange 57% 55%
Tokyo Stock Exchange Very small Very small
Eurex Less than 5%
MEFF Mini-futures: 70 to 80% Mini-futures: 75%
Other products: 5 to 15% Other products: 5 to 15%
Warsaw Stock Exchange Futures: 54% Futures: 56%
Options: 59% Options: 53%
IOMA Derivatives Market Survey 2008 – May 2009
54
OTC trades registered by exchanges
Several exchanges include a registration facility for OTC trades.
Eurex processed 857 million contracts on its wholesale trading facilities in 2008 (+44% over 2007).
Index options are the main segment of this market, stock futures recorded the strongest increase in
2008 (2.5 times more than in 2007).
In 2008, the OTC service of Bclear of NYSE Liffe processed 190 million contracts an annual increase
by 55% over 2007. Stock futures registered on Bclear grew the fastest and accounted for 120.9 million
contracts, representing 97% of the overall trading volumes in stock futures on Liffe. In December 2008
Liffe broadened the range of products eligible to Bclear by adding CDSs on European indexes.
In Europe, MEFF also recorded a very rapid growth of its OTC processing services, especially on
individual stock futures (+163%) and options (+43%).
In Asia, OTC trades processed by Hong Kong Exchanges and Clearing increased on stock options
and stock index futures but they decreased on index options.
In the Americas, BM&F markets processed more than 2 million OTC swaps as in 2007.
Stock options: OTC trades processed by exchanges
OTC contracts processed by exchanges as a
Million contracts traded percentage of total contracts traded
Stock Exchange (OTC+ on-exchange)
Contracts Notional value of Number of
2008 2007 Growth rate
traded contracts traded trades
Eurex 152.0 133.5 14% 43.5% 42.0% na
Hong Kong Exchanges 6.7 6.0 11% 10.9% na na
Liffe (Bclear) 41.4 28.3 46% 22.5% 39.2% 0.4%
MEFF 13.2 9.2 43% 42.0% 41.4% 6.7%
Montréal 0.2 1.3% na 0.01%
IOMA Derivatives Market Survey 2008 – May 2009 55
Stock futures: OTC trades processed by exchanges
OTC contracts processed by exchanges as a
Million contracts traded percentage of total contracts traded
Stock Exchange (OTC+ on-exchange)
Contracts Notional value of Number of
2008 2007 Growth rate
traded contracts traded trades
Eurex 130.0 51.8 151% 99.8% 100.0%
Hong Kong Exchanges 0.1 -
Liffe (Bclear) 120.9 72.4 67% 97.1% 94.8% 62.5%
MEFF 39.4 15.0 162% 46.0% 46.0% 0.3%
Stock index options: OTC trades processed by exchanges
OTC contracts processed by exchanges as a
Million contracts traded percentage of total contracts traded
Stock Exchange (OTC+ on-exchange)
Contracts Notional value of Number of
2008 2007 Growth rate
traded contracts traded trades
BM&FBOVESPA 0.9 0.3 178% 40.1% 22.1%
Eurex 394.6 234.2 68% 76.6% 76.5%
Hong Kong Exchanges 1.5 3.6 -58% 21.6% 0.5%
Liffe (Bclear) 23.3 17.3 35% 34.8% 47.2% 0.3%
MEFF 5.7 3.4 65% 40.7% 40.4% 2.5%
Stock index futures: OTC trades processed by exchanges
OTC contracts processed by exchanges as a
Million contracts traded percentage of total contracts traded
Stock Exchange (OTC+ on-exchange)
Contracts Notional value of Number of
2008 2007 Growth rate
traded contracts traded trades
Eurex 73.1 53.9 36% 14.3% 11.5%
Hong Kong Exchanges 1.7 1.6 8% 3.6% na 0.0%
Liffe (Bclear) 5.3 4.9 9% 5.0% 7.1% 0.02%
MEFF 1.3 1.5 -15% 11.1% 62.7% 0.2%
IOMA Derivatives Market Survey 2008 – May 2009
56
Prospects for clearing organizations
For the second year running data was gathered from clearing organizations.
In the Americas, the Options Clearing Corporation (OCC) is the world's largest equity derivatives
clearing organization. OCC's participant exchanges include: the Boston Options Exchange, Chicago
Board Options Exchange, International Securities Exchange, NASDAQ OMX PHLX, NYSE Amex and
NYSE Arca.
In Europe-Africa-Middle East region, the two largest clearing corporations are Eurex and LCH
Clearnet. Eurex clearing house is clearing Eurex on-exchange trades but also an important part of
OTC trades. LCH Clearnet is mostly responsible for clearing Liffe’s trades on-exchange and OTC
trades via Bclear. The other stock exchanges have their own clearing house that clears 100% of the
trades on-exchange.
In the Asia-Pacific region, all the stock exchanges have their own clearing house that clears 100% of
the trades on-exchange.
The Lehman Brothers bankruptcy and the financial crisis generated an increased interest of market
participants and regulators for centralized clearing of OTC trades, so as to increase market
transparency and capital efficiency thanks to position netting and to reduce counterparty and systemic
risks. A major area for this development is the CDS market, which is still dependent upon email and
voice channels and suffers from very frequent errors (13% of CDS trades according to ISDA).
Following pressure from the European Commission, nine international banks committed to clear a
Euro area-based clearing facility for their OTC trades. In December 2008, NYSE Liffe added CDSs to
the range of products that can be registered on its OTC service, Bclear, and cleared by LCH.Clearnet
London. NYSE Liffe CDS contracts are based on Markit iTraxx Europe indexes. LCH.Clearnet in Paris
also announced plans to launch clearing of Euro area CDS and Eurex announced initiative to include
CDS in their clearing offer. In March 2009, ISDA announced a standardisation of CDS contracts that
should facilitate the clearing process.
In March 2009, ICE Trust, a subsidiary of IntercontinentalExchange (ICE), began to clear CDSs,
starting with the North American Markit CDX indexes, single-name CDSs being expected in the
following months. ICE Trust offer is based on the expertise of Creditex, an interdealer broker, it
acquired recently. Its membership is open to buy-side and sell-side institutions. In March 2009, ICE
Trust cleared 600 index CDS trades for a notional amount of 70 billion dollars.
IOMA Derivatives Market Survey 2008 – May 2009 57
ICE also intends to develop a specialized CDS clearing house for European-based products, such as
Markit iTraxx indexes. CME (through its recently acquired ClearPort platform) together with the Citadel
hedge fund got authorization from the SEC to create a clearing house for CDSs, called CMDX.
Equity options clearing in Europe, Africa, Middle East
(millions contracts single counted)
1600
Others (100% cleared home)
1400
1200 LCH Clearnet (others)
1000
LCH Clearnet (Liffe OTC BClear)
800
LCH Clearnet (Liffe on-exchange)
600
400 Eurex (OTC)
200 Eurex (on-exchange)
0
2007 2008
Equity futures clearing in Europe, Africa, Middle East
(millions contracts single counted)
1800
Others (100% cleared home)
1600
1400 LCH Clearnet (others)
1200
LCH Clearnet (Liffe OTC BClear)
1000
800 LCH Clearnet (Liffe on-exchange)
600
Eurex (OTC)
400
200 Eurex (on-exchange)
0
2007 2008
Equity derivatives clearing in Americas
(millions contracts single counted)
6000
5000
Others (100% cleared home)
4000
3000
2000
The Options Clearing Corporation
1000
0
2007 2008
IOMA Derivatives Market Survey 2008 – May 2009
58
Conclusion
After several years of rapid growth, the pace of development of all derivative markets segments,
except commodity futures, slowed down in 2008. It turned negative on interest rate products.
Commo-
2008 Single Stock Stock Index STIR LTIR Currency
dities
Millions of contracts Options 4 368 4 077 439 171 50 154
traded Futures 1 059 2 286 1 243 1 322 332 1 545
Growth rate of Options 17% 9% -6% -9% 17% 16%
contracts traded Futures 66% 34% -18% -14% 4% 38%
Commo-
2007 Single Stock Stock Index STIR LTIR Currency
dities
Millions of contracts Options 3 729 3 745 469 188 43 132
traded Futures 638 1 706 1 522 1 530 320 1 121
Growth rate of Options 35% 18% 21% 6% 79% 22%
contracts traded Futures 122% 46% 13% 20% 52% 19%
Although a sharp downturn has been observed since Lehman Brothers collapse, equity products are
resisting, and their share in total derivatives trading increased from 65% to 69%.
For the first time trading in equity options has exceeded trading in equity index options. However,
the financial crisis was still producing its negative effects at the beginning of 2009 and growth
seems to be at least provisionally frozen on a majority of exchanges.
Index options and futures were also hit by the financial crisis. However, a huge increase in KOSPI
index options was observed in February 2009: more than 200 million contracts were traded
during that month alone (against 140 million in February 2008).
The fledgling market of equity futures again showed a very impressive rate of growth and there
were again new exchanges that introduced equity futures trading in Asia.
Growth of all segments of interest rate derivatives turned negative, short term like long term
products, options like futures.
IOMA Derivatives Market Survey 2008 – May 2009 59
Futures on short term interest rate products suffered the worst decline. The growth of this segment
had already shown a slowdown in 2007. But half of the decrease in 2008 is due to a technical
change on Mexder, where a short term contract has been replaced by a long term contract with a
much lower velocity of trading.
The growth of currency derivatives had been exceptional in 2007. It remained strong but slowed
down in 2008. However, it should be noted that the pace of growth of currency options did not
weaken in 2008.
The growth of commodity derivative markets, driven by Chinese markets, seems to be the only one
that has not been affected by the financial crisis.
Finally, we think that the year 2008 can hardly be discussed without distinguishing the trends before
and after worsening of the crisis triggered by Lehman Brothers’ collapse. The period that began in the
fourth quarter of 2008 is characterized by a very marked decline in liquidity. Due to increased volatility
and regulatory restrictions on short selling, spreads quoted by market makers increased while, in
some cases, some market makers were unable to fulfill their obligations. For example, spreads on
individual equity options increased 40% on average compared to the third quarter of 2008, and by
about 100% compared to the fourth quarter of 2007 in the US. Simultaneously, the depth of order
book diminished everywhere.
Trading volumes fell to levels lower than the same period of 2008, while their growth had been
continuous throughout all the previous years. First releases relating to March 2009 volumes indicate
that derivatives volumes are still significantly lower than in March 2008.
IOMA Derivatives Market Survey 2008 – May 2009
60
IOMA Derivative trading: trends since 1998
by Didier Davydoff
and Grégoire Naacke
IEM Finance
May 2009
As of May 2009, the members of IOMA / IOCA were:
Athens Derivatives Exchanges MEFF
Australian Securities Exchange Mercado Mexicano de Derivados
BM&FBOVESPA (Mexder)
Bolsa de Comercio de Buenos Aires NYSE Euronext
Bolsa de Comercio de Santiago NYSE Liffe
Bombay Stock Exchange NASDAQ OMX Group
Borsa Italiana National Stock Exchange of India
Bursa Malaysia Derivatives Osaka Securities Exchange
Bursa Malaysia Derivatives Clearing Oslo Børs
Canadian Derivatives Clearing Singapore Exchange
Chicago Board Options Exchange Taiwan Futures Exchange
CME Group Tel-Aviv Stock Exchange
Eurex Frankfurt Thailand Futures Exchange
Eurex Zürich The Clearing Corporation
Hong Kong Exchanges and Clearing The Options Clearing Corporation
ICE Futures TMX Group
International Securities Exchange Tokyo Stock Exchange
Johannesburg Stock Exchange Warsaw Stock Exchange
Korea Exchange Wiener Börse
LCH.Clearnet Zhengzhou Commodity Exchange
Every effort has been made to ensure that the information in this survey is accurate at the time of
printing, but the Secretariat cannot accept responsibility for errors or omissions.
International Options Market Association (IOMA)
Derivative trading: trends since 1998
Table of Contents
Introduction ................................................................................................................................ 4
General trends in derivative trading ........................................................................................... 5
A- General growth........................................................................................................ 5
B - Contribution of new exchanges ................................................................................ 6
C - Regional developments .......................................................................................... 8
On-exchange derivative trading v. cash equity ........................................................................ 15
On-exchange derivative trading v. OTC trading ...................................................................... 18
Key characteristics of the industry ........................................................................................... 20
A - Electronic trading v. outcry.................................................................................. 20
B - Membership ......................................................................................................... 21
Conclusion ................................................................................................................................ 23
IOMA Derivative trading: trends since 1998 – May 2009 3
Introduction
Each year, the World Federation of Exchanges collects data from derivative exchanges for the
International Options Markets Association (IOMA) and the annual IOMA survey analyses details of the
latest developments in trading activity. The present paper aims at presenting a broader view of general
trends in the industry over the last 10 years.
Even though trading volumes established or even diminished in the last quarter of 2008, the
tremendous growth of derivative exchanges remain the most striking characteristic of the last ten
years. In order to understand the factors behind such growth, it is useful to compare derivative
exchanges with two neighboring markets: underlying cash markets and OTC derivative markets. We
will then try to isolate the different components of growth. Finally we will analyse some key
developments within the industry relating to trading systems (outcry versus electronic) and the
membership of markets.
IOMA Derivative trading: trends since 1998 – May 2009
4
General trends in derivative trading
A- General growth
All groups of products (defined by their underlyings) showed an increase in their trading volumes
between 1998 and 2008. The smallest increase observed was for interest rate products with volumes
increasing 3.6 times, while stock index options and futures showed the largest rise with volumes
increasing 17 times.
Part of the growth recorded for index derivatives is due to the tremendous success of KOSPI 200
options. 3.9 billion options on the KOSPI 200 index were traded in 2008, representing two thirds of the
global volumes recorded by all derivative exchanges. Even though the notional value of individual
KOSPI 200 options is lower than the average notional value of index options traded on other
exchanges, the Korea Exchange also dominates in terms of the overall notional value traded. The
case of KOSPI 200 options is so specific that it raises statistical difficulties. Therefore, we decided to
present both figures, including and excluding the Korea Exchange when necessary.
When KOSPI 200 options are excluded, the growth of equity index derivatives appeared to be parallel
to that of individual equity derivatives: both segments of the market show volumes traded increased
eleven times, a growth that is lower than KOSPI 200 options, although it remains considerable.
Contracts traded by product group (base 100 in 1998)
1800
Single stock options and futures
1600
Stock index
1400 Interest rate
Currency
1200 Commodity
1000
800
600
400
200
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
IOMA Derivative trading: trends since 1998 – May 2009 5
Contracts traded by product group (base 100 in 1998)
1200
Single stock options and futures
Stock index (excl. KOSPI 200 options)
1000 Interest rate
Currency
800 Commodity
600
400
200
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
B - Contribution of new exchanges
The following table shows the respective contributions to the overall growth of exchanges already
offering in 1998 a given group of products on the one hand, and of exchanges newly offering these
products on the other.
Contribution of existing and new exchanges to the growth of derivative trading
(millions of contracts traded)
Equity Equity Index Index LTIR LTIR
options futures options futures options futures
(1) Vol. in 1998 623 - 196 172 75 421
(2) Add. trading 2008/1998: (3) + (4) - (5) 3 745 1 059 3 881 2 114 96 900
(3) Of which ex. already present in 98 2 541 - 3 613 1 819 108 884
(4) Of which new exchanges 1 204 1 059 268 295 0 20
(5) Of which ex. that exit the market - - - - 12 4
(6) Vol. in 2008: (1) + (2) 4 368 1 059 4 077 2 286 171 1 322
Number of exchanges active in that market
Number of exchanges in 1998 26 0 47 44 18 29
Number of exchanges in 2008 27 19 30 30 7 16
IOMA Derivative trading: trends since 1998 – May 2009
6
Equity options was the group of products with the largest volume of trading in 1998 and they were
still in top position ten years later, in 2008. It is also for that group of products that new exchanges,
which either did not exist in 1998 or included equity options in their offer between 1998 and 2008,
contributed the most to the growth: of the 3.8 billion additional contracts recorded in 2008 as
compared to 1998, one third were traded on new exchanges when compared to 1998. The largest is
the International Securities Exchange founded in 2000 and where almost one billion equity options
1
were traded in 2008 . 27 exchanges offered equity options in 2008, close to the 26 exchanges already
present in 1998. However, behind the stability of the number of exchanges, only 18 of them existed in
1998: the eight new exchanges were offset by the nine exchanges that exited the market or were
integrated within groups of exchanges (such as NYSE Euronext).
Equity futures show a very different picture, as they did not exist in 1998. This group of products is
new for all 19 exchanges present in this segment.
Index options are the products that showed the most growth, with a contract volume increasing 21
times between 1998 and 2008. Here, new entrants contributed no more than 7% to the overall growth.
However, a single player, the Korea Exchange is the main contributor responsible for the increase in
the number of contracts to 3.9 billion (2.7 billion more options traded on the KOSPI 200 index in 2008
than in 1998). The Korea Exchange accounted for 16% of global volumes in 1998, and more than two
thirds in 2008. Excluding Korea, the contribution of new entrants would represent 23% of the growth.
Index options are the most frequently listed products in the world with 30 exchanges including them in
their offer. Nine new exchanges appeared in this segment, the largest in 2008 being the National
Stock Exchange of India. However, the consolidation of the industry reduced from 47 to 30 the number
of exchanges recording trading volumes in 2008.
Volumes of index futures increased 13 times between 1998 and 2008. The contribution of new
exchanges is of the same order of magnitude as for index options. But the contribution of exchanges
already present in 1998 was lower for index futures (2.1 billion contracts) than for index options (3.9
billion contracts). The average size of index futures contracts is higher than that of index options, and
the overall notional value of traded index futures was 10% higher than that of index options. Finally,
there were as many exchanges offering index futures (30) as index options in 2008. However, both
lists of exchanges are not completely identical: reflecting the split of jurisdictions between options and
futures, four US exchanges list index options without listing index futures. Symmetrically, four relatively
small exchanges are present in the index futures segment, and not on the index options, the largest
being the Turkish Derivatives Exchange (40 million contracts in 2008).
1
Note that for the purpose of this calculation, we do not consider exchanges acquired by other exchanges as new exchanges, even when their
name and their trading processing were completely transformed. For example, NYSE ARCA is considered as the continuation of the Pacific
Stock Exchange as it was acquired by Archipelago in 2005, a group acquired in turn by NYSE Group in 2006.
IOMA Derivative trading: trends since 1998 – May 2009 7
Finally, the long term interest rate segment could be considered as a more mature segment,
although the number of options traded doubled while the number of futures traded tripled, reflecting an
industry that was still growing, at least until 2007.
All exchanges active on LTIR options in 2008 already existed in 1998 and the recorded volumes are
the smallest among all groups of products. The number of exchanges offering LTIR options decreased
from 18 in 1998 to 7 in 2008. The withdrawal of exchanges from this market had little impact (negative
12 million) contracts on the global activity in this group of products. In other words, those exchanges
already recorded low volumes in 1998.
The number of exchanges offering LTIR futures also decreased, from 29 to 16 in the last ten years.
Six new exchanges introduced LTIR futures contracts in their offer (the largest volumes being
recorded by the Korea Exchange in 2008), but nine other exchanges with relatively low levels in 1998
withdrew. However, it should be noted that the size of LTIR contracts is much higher than that of
equity-linked derivatives. As a result, LTIR options record the highest notional value of trading among
all groups of products (280 000 billion US dollars in 2008).
C - Regional developments
The main region that contributed to the growth of equity options over the last ten years was the
Americas, and more specifically the United States. The Americas increased their dominance at the
expense of the Europe, Africa, Middle East region. Part of this trend can be explained by the growth of
ETF options in the United States, products that, in many instances, are substitutes for index options: if
ETF options were not taken into account, the relative weight of the Americas in global equity option
trading would be 80% instead of 83%.
The Asia Pacific region grew at a pace similar to that of the Americas but starting from a much lower
level. The main contributors to growth in that region were Hong Kong Exchanges.
In Europe, the Compound Annual Growth Rate (CAGR) was not as strong as in the other two regions,
but it was still high (14%). The main contributor to growth was Eurex.
IOMA Derivative trading: trends since 1998 – May 2009
8
Stock options volumes (millions of traded contracts)
Compound Regional Regional
Volumes Volumes
Annual Growth breakdown in breakdown in
traded in 1998 traded in 2008
Rate (CAGR) 1998 2008
Americas 439 3646 24% 70% 83%
Asia Pacific 10 84 23% 2% 2%
Europe, Africa, Middle East 174 638 14% 28% 15%
Total 623 4 368 21% 100% 100%
Stock options volume (millions of traded contracts)
5000
4500
Europe, Africa, Middle East
4000
3500 Asia Pacific
3000
Americas
2500
2000
1500
1000
500
0
1998 2008
The most striking phenomenon when we look at the development of index options is the sharp
increase of Asia through KOSPI 200 options in Korea, which allowed the Asia pacific region to
represent three-quarter of global volumes.
Index options volumes (millions of traded contracts)
Compound Regional Regional
Volumes Volumes
Annual Growth breakdown in breakdown in
traded in 1998 traded in 2008
Rate (CAGR) 1998 2008
Americas 75 310 15% 38% 8%
Asia Pacific 40 3057 54% 20% 75%
Europe, Africa, Middle East 81 710 24% 41% 17%
Total 196 4 077 35% 100% 100%
IOMA Derivative trading: trends since 1998 – May 2009 9
Index options volume (millions of traded contracts)
4500
4000
Europe, Africa, Middle East
3500
Asia Pacific
3000
2500 Americas
2000
1500
1000
500
0
1998 2008
If the Korean figures are removed then the Asia Pacific region is still the one with the highest growth
rate by far. Asia has almost caught up with Americas thanks to the tremendous growth of the National
Stock Exchange of India and of TAIFEX in Taiwan. However, as mentioned above, part of the
decrease in the United States market share in index options is offset by the growth of ETF options in
that country.
In Europe, the CAGR has also been very strong over the last ten years. The growth in Europe was
mainly driven by the Dow Jones STOXX 50 options traded on Eurex, where 84% of the European
index options were traded in 2008.
Index options volumes, excluding Korea (millions of traded contracts)
Compound Regional Regional
Volumes Volumes
Annual Growth breakdown in breakdown in
traded in 1998 traded in 2008
Rate (CAGR) 1998 2008
Americas 75 310 15% 46% 24%
Asia Pacific 8 290 44% 5% 22%
Europe, Africa, Middle East 81 710 24% 50% 54%
Total 164 1 311 23% 100% 100%
Index options trading also increased rapidly in Europe
IOMA Derivative trading: trends since 1998 – May 2009
10
Index options excluding Korea volume (millions of traded contracts)
1400
1200 Europe, Africa, Middle East
1000 Asia Pacific
800 Americas
600
400
200
0
1998 2008
Index futures trading developed in all the geographical zones. The most rapid growth was recorded in
the Americas, where the CME Group maintains an overwhelming domination following the merger with
CBOT. The two other regions grew at a similar and rapid pace. The main contribution to growth came
from Eurex in Europe and from the National Stock Exchange of India and Osaka Stock Exchange in
Asia.
Index futures volumes (millions of traded contracts)
Compound Regional Regional
Volumes Volumes
Annual Growth breakdown in breakdown in
traded in 1998 traded in 2008
Rate (CAGR) 1998 2008
Americas 53 941 33% 31% 41%
Asia Pacific 49 583 28% 29% 26%
Europe, Africa, Middle East 70 761 27% 41% 33%
Total 172 2 286 29% 100% 100%
IOMA Derivative trading: trends since 1998 – May 2009 11
Index futures volume (millions of traded contracts)
2500
Europe, Africa, Middle East
2000
Asia Pacific
1500
Americas
1000
500
0
1998 2008
LTIR derivative trading grew slower than equity-linked products in the last ten years. It remains
marginal in Asia, where only two exchanges, the Tokyo Stock Exchange and the Australian Securities
Exchange, still include LTIR options in their offer.
In Europe the concentration process has been dramatic: 16 exchanges active in LTIR options trading
in 1998 were replaced by only one in 2008 (Eurex). This trend has been accompanied, or was the
result of a concentration of trading on derivatives with German underlyings, the other government
debts being highly correlated to the German one. The Johannesburg Stock Exchange is the only other
remaining player in the region. But this region is the only one where LTIR option trading grew in the
same order of magnitude as other derivatives.
In the Americas, the growth of LTIR futures has been more than twice as strong as options. That
region gained market share for the latter products, while it lost its overwhelming dominance for the
latter. The CME group emerged as the largest player in the Americas, followed by the Montreal Stock
Exchange and Mexder.
IOMA Derivative trading: trends since 1998 – May 2009
12
Long term interest rate options volumes (millions of traded contracts)
Compound Regional Regional
Volumes Volumes
Annual Growth breakdown in breakdown in
traded in 1998 traded in 2008
Rate (CAGR) 1998 2008
Americas 53 98 6% 83% 57%
Asia Pacific 3 4 4% 4% 2%
Europe, Africa, Middle East 8 69 24% 13% 40%
Total 63 171 10% 100% 100%
Long term interest rate futures volumes (millions of traded contracts)
Compound Regional Regional
Volumes Volumes
Annual Growth breakdown in breakdown in
traded in 1998 traded in 2008
Rate (CAGR) 1998 2008
Americas 167 626 14% 40% 47%
Asia Pacific 27 67 9% 7% 5%
Europe, Africa, Middle East 223 629 11% 53% 48%
Total 418 1 322 12% 100% 100%
LTIR options volume (millions of traded contracts)
180
160
Europe, Africa, Middle East
140
Asia Pacific
120
100 Americas
80
60
40
20
0
1998 2008
IOMA Derivative trading: trends since 1998 – May 2009 13
LTIR futures volume (millions of traded contracts)
1400
1200 Europe, Africa, Middle East
1000 Asia Pacific
800 Americas
600
400
200
0
1998 2008
Breakdown of equity and LTIR derivatives volumes by geographical zone
1998 2008 2008 (Excl. Korea)
27%
34%
38%
42%
53% 53%
31% 13%
9%
Americas Asia Pacific Europe, Africa, Middle East
IOMA Derivative trading: trends since 1998 – May 2009
14
On-exchange derivative trading v. cash equity
This section compares trading volumes on cash equity markets and equity-linked derivative markets.
Since the average size of contracts changes over time, cash equity trading and equity-linked derivative
trading have to be compared in value, rather than in volume.
The value of options trading is equal to the value of premiums exchanged, data that is requested in
IOMA annual questionnaires. However, using that information for that purpose would raise two
difficulties: firstly, it is not applicable to futures, whereas index futures represent a major part of equity-
linked derivative trading; secondly, several large exchanges do not provide this data.
We therefore decided to use the “notional value” of derivative trading. This data does not represent
cash payments on derivative markets, but its evolution (rather than its absolute level) can legitimately
be compared to the evolution in value of cash equity trading. As for options premium, this data is not
provided by all exchanges, but those exchanges which do provide it represent more than 96% of
trading volumes, except for equity options. Equity options are the largest segment of the market in
terms of contracts traded, but account for no more than 4% in the total notional value of trading.
Overall, available notional values of trading represent 85% of total trading of equity-linked derivatives
in the world.
Representativeness
Notional value of traded contracts of exchanges for
2008
which notional value
Structure in % of total
In billion USD of trading is available
notional value traded
All Equity-linked derivatives 242 628 567 100% 85.1%
Equity options 9 281 438 4% 62.2%
Stock futures 2 320 319 1% 99.7%
Stock index options 110 000 445 45% 99.5%
Stock index futures 121 026 365 50% 96.6%
The graph below shows the trend in share trading, equity-linked derivative trading and the ratio of
derivative trading to share trading.
From 1998 to 2002, fluctuations of cash and derivative trading mainly reflected ups and downs
in equity prices. During this period, the ratio of derivative trading to cash trading did not
change.
IOMA Derivative trading: trends since 1998 – May 2009 15
From 2003 to 2007, a rapid expansion of cash and derivative trading was observed and the
growth of derivative trading was more rapid than the one of cash trading: the ratio of
derivatives to cash trading rose from 1.2 to 2.0.
In 2008 a stabilization of volumes on both markets happened.
300 2,5
2,1
2,0
250
2,0
1,7
200 1,5
1,4 1,4
1,5
1,2 1,2 1,2
150
1,0
100
0,5
50
0 -
1998 1999 2002 2003 2004 2005 2006 2007 2008
Value of share trading (USD 1 000 billions)
Not. value of Equity Derivatives trading (USD 1 000 billions) - ex KOSPI
Ratio equity-linked derivatives (exc. KOSPI options)/cash
How could the increase in the ratio of derivative trading to cash trading between 2002 and 2007 be
explained?
Firstly, it is interesting to note that all products have contributed to growth while the breakdown of
trading volumes has not substantially changed.
Breakdown of trading volumes in equity-linked products
(excluding KOSPI 200 options)
1998 2008
Equity options 6.3% 4.6%
Stock futures 0.0% 1.2%
Stock index options 33.7% 33.6%
Stock index futures 59.9% 60.6%
IOMA Derivative trading: trends since 1998 – May 2009
16
A second interesting observation is that the growth of derivative markets cannot be explained by a
more intense intra-day trading that might have resulted from the development of algorithmic trading.
The following graph shows that the overall velocity of trading in equity-linked products did not
2
significantly increase . The annual velocity of trading oscillated around 7 from 1999 to 2007. It rose to
13 in 2008, but the move was due to the fall of the open interest at the end of 2008, rather than
increased traded contracts. The rise in the apparent velocity of trading at the end of 2008 was
especially large for index futures, and more precisely on the CME, where the open interest was down
42% on 2007 (and CME open interest accounted for almost three quarters of the overall open interest
on index futures in the world).
Annual velocity of trading
100
90 All equity derivatives (excl. KOSPI)
Stock options
80
Stock futures
70 Index options (excl. KOSPI)
60 Index futures
50
40
30
20
10
0
1 2 3 4 5 6 7 8 9 10
The above analysis demonstrates that the increase of derivative trading was not generated by market
players artificially multiplying trades: the increase in trading activity was parallel to the increase of
open interest. The growth of derivative markets was not generated by any internal dynamic of trading:
it meets the needs of investors and other economic agents willing to hold positions for a certain period
of time. The growth of derivative markets in the last 10 years is the result of a broader use of hedging
and speculative instruments. Hedge funds certainly contributed to the growth, but the fact that volumes
were still high after the crisis in the autumn of 2008 shows that other market participants are now
persistently active.
2
We calculate the velocity of trading as the ratio of the annual volume of contracts traded to the average of the open interest at
the beginning and at the end of the year.
IOMA Derivative trading: trends since 1998 – May 2009 17
On-exchange derivative trading v. OTC trading
This section aims at comparing trends in OTC derivative trading and on-exchange trading.
Outstanding amounts of OTC derivatives grew very rapidly over the last ten years, at an average
annual growth rate of 22%. The largest component of these positions is related to interest rate
instruments (mainly interest rate swaps, other contracts being forward rate agreements and options).
The CDS market became a very significant segment of the OTC market and reached an outstanding
value close to US$ 60 billion at end of June, according to BIS. It decreased to US$ 42 billion after the
Lehman Brothers’ collapse and the crisis of the interbank market. The CDS market is still dependent
upon email and voice channels and it suffers from very frequent errors (13% of CDS trades according
to ISDA). Therefore exchanges can develop an offer in this market that actually solves many problems
it encounters. The success of such offers will be eased by the standardization of contracts promoted
by ISDA in March 2009.
Outstanding amounts of OTC derivatives
December 2008 In billion USD In %
Foreign exchange 49 753 8%
Interest rate 418 678 71%
Equity-linked 6 494 1%
Commodity 4 427 1%
CDS 41 868 7%
Unallocated 70 742 12%
Total contracts 591 963 100%
IOMA Derivative trading: trends since 1998 – May 2009
18
Amounts outstanding of OTC derivatives
(In billions of US dollars )
700 000
600 000
500 000
400 000
300 000
200 000
100 000
0
Dec.98 Dec.99 Dec.00 Dec.01 Dec.02 Dec.03 Dec.04 Dec.05 Dec.06 Dec.07 Dec.08
Foreign exchange Interest rate Equity-linked Commodity CDS Unallocated
Turning to the comparison between OTC markets and on-exchange markets, caution is needed in the
interpretation of statistics: only aggregate outstanding positions are available from OTC markets, and
this data is different from the open positions recorded by exchanges. Indeed, outstanding positions on
the OTC markets are gross positions: an operator willing to close a position has to take a symmetrical
position and therefore increases the total outstanding positions on the market. Conversely, open
positions on exchanges are net positions. Therefore, OTC outstanding amounts are more comparable
to exchanges volumes than to open positions. In any case, the relative rate of growth of both markets,
rather than their absolute levels, should be analysed.
OTC and on-exchange trading of equity-linked derivatives showed a similar pace of growth from 1998
to 2007. In the first half of 2008, all figures were still rising. But the contraction of the market that
followed the collapse of Lehman Brothers translated into a sharp decrease of equity-linked OTC
notional amount outstanding (-23% as compared to end of 2007) and of the notional value of on-
exchange open positions (-31%). The smaller decrease on OTC markets can be explained by gross
positions that have to be increased in a first step to close existing exposures, as explained above.
IOMA Derivative trading: trends since 1998 – May 2009 19
Equity derivatives trading (base 100 in 1998)
1000
900 Notional amounts outstanding of OTC trading
800 Notional value of on-exchange open interest
700 Notional value of on-exchange trading
600
500
400
300
200
100
0
1998 2002 2003 2004 2005 2006 2007 2008
Key characteristics of the industry
A - Electronic trading v. outcry
Most derivatives markets are now fully electronic.
Electronic trading is also gaining an increasing share of the trading activity on the exchanges which
have a trading floor (all of them being in the Americas). CBOE is launching a fully electronic market
“C2”. On CME Group the share of electronic trading is also growing regularly and the Comex contracts
listed on NYMEX migrated successfully to the Globex platform.
Share of electronic trading on exchanges having also a trading floor
2008 2007 2006
NYSE Amex Options (formely American SE) 20% 20% 25%
Buenos Aires Stock Exchange NA NA 86%
BM&FBOVESPA NA NA 53% (BM&F only)
Chicago Board Options Exchange (CBOE) 62% 53% 70%
CME Group 80% 78% 72%
NYSE Arca Options (formerly Pacific SE) 70% NA NA
Philadelphia SE NA 76% 63%
IOMA Derivative trading: trends since 1998 – May 2009
20
B - Membership
We report below the number of members for those exchanges who answered this question in the
IOMA questionnaire. The number varies markedly across exchanges, depending on the size of each
market and the types of eligible members. On markets such as CBOE, National Stock Exchange of
India and NYSE Liffe, individual traders can become members of the exchange, while membership is
reserved to institutions in most other markets.
Since 2006 – the first year when this information was requested in the IOMA questionnaire – the
average number of members has decreased because CBOE members have fallen from 2 002 to
1 149. But the median has increased.
Number of members of derivatives markets
2008 2006
Average 222 245
Average (excluding CBOE) 179 161
Median 98 68
Most exchanges do not admit buy-side institutions as members. Only two exchanges, TAIFEX and
Hong Kong Exchanges, indicate that a majority of their members are buy-side institutions. However,
even if buy-side institutions are not members of exchanges, and have no legal Direct Market Access
(DMA), a number of them achieve the same result using order routing facilities to route orders to the
market, and de-facto automatically to the central order book. Most exchanges are not able to measure
the relative weight of DMA in the order flow. However BOVESPA reports a percentage of 17% of the
trading value, MexDer 4% in equity index futures and 35% in equity options. MEFF estimates that the
business brought by DMA represents around 25%.
Similarly, most exchanges cannot measure the relative weight of orders routed by hedge funds, as
they have no access to the breakdown of their members’ clients. But most of them indicate that they
were active participants in the market, contributing, among other things, to the growth of algorithmic
trading on electronic platforms. New statistics available from CME Group indicate that the top 25
hedge funds active on the market accounted for almost 9% of the volume traded on the market. But
their volume decreased 32% in the fourth quarter of 2008 when compared to the third quarter of the
3
same year .
3
Source : CME Group, quoted in Burghardt and Acworth, FIA Annual Volume Survey, March 2009
IOMA Derivative trading: trends since 1998 – May 2009 21
Number of members
Chicago Board Options Exchange (CBOE) 1149
National Stock Exchange of India 1014
NYSE Liffe (European markets) 944
Eurex 406
International Securities Exchnage (ISE) 192
BM&FBOVESPA 179
Tokyo Stock Exchange Group 165
Hong Kong Exchanges 148
MEFF 105
ASX SICOM 100
Osaka SE 98
Bourse de Montréal 98
Korea Exchange 72
MexDer 68
TAIFEX 62
Athens Derivatives 54
NASDAQ OMX Nordic Exchanges 50
Thailand Futures Exchange (TFEX) 36
Budapest Stock Exchange 35
Warsaw SE 33
ASX SYCOM 33
Tel Aviv SE 29
Singapore Exchange 26
0 200 400 600 800 1000 1200 1400
IOMA Derivative trading: trends since 1998 – May 2009
22
Conclusion
Over the last ten years, the development of derivative trading was very impressive. Volumes increased
7.8 times and grew even more rapidly than volumes on cash markets, especially between 2003 and
2007, when equity markets were bullish.
The highest growth rate was observed for equity derivatives: volumes increased 13.5 times between
1998 and 2008 and in 2008 they accounted for 69% of the derivative trading volumes against 40% in
1998. The growth of equity derivatives has been stronger than the one of cash equity markets. The
other products, namely interest rate, currency and commodity derivatives, also experienced rapid
growth during this period: they grew respectively 5.7, 4.9 and 7.8 times.
Regarding regional development of derivative trading, the most striking phenomenon is the
tremendous growth of Asia with the impressive development of KOSPI 200 Options. Apart from this
particular product, Asia Pacific region also developed with the arrival of new stock exchanges. In
Americas, equity options were very successful, particularly with options on ETFs and in Europe, index
options experienced a strong growth mainly driven by Eurex.
In ten years, the industry of stock exchanges saw many changes. There have been a lot of mergers
and acquisitions involving the biggest stock exchanges and new exchanges appeared.
In the recent years, electronic trading has gained an increasing share of the trading activity.
Nevertheless, the analysis of the velocity of trading demonstrates that the increase of derivative
trading was not mainly generated by the development of algorithmic trading. The growth of derivative
markets is driven by an increasing use of its products by investors and other economic agents. Further
developments are expected following the demand for safer markets by investors, market players and
regulators, which should result in a transfer of a significant part of OTC trading to on-exchange trading.
IOMA Derivative trading: trends since 1998 – May 2009 23
