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Global Exchange Derivatives Volumes
Global Exchange Derivatives Volumes
By Research & Planning Department Financial derivatives are much more popular than non-nancial derivatives, both in volume terms and in number of exchanges offering them. Contract volume is the preferred, although imperfect, measure for comparing exchange activity. Notional value, which may be a better measure in economic terms, is usually not readily available.
Global trading of exchange-traded futures and options (collectively referred to as derivatives in this article) is growing fast. According to data provided by the US-based Futures Industry Association (FIA) 1, global exchange derivatives volume2 rose from 2.4 billion contracts in 1999 to 9.9 billion contracts in 2005, representing an annual growth rate of 27 per cent (see Figure 1a). The growth rate is much higher than the 8 per cent in the global equity market3 over the same period according to the statistics of the World Federation of Exchanges (WFE) (see Figure 2). Nonetheless, equity market volumes are more volatile in the rst half of 2006 a total of 5.9 billion derivative contracts were traded, representing a pro-rata growth rate of 19 per cent over 2005, compared to a remarkable 42 per cent growth in global equity trading. Equity and derivatives market growth on statistics during the years was due partly to the increase in the number of exchanges reporting the statistics to the FIA or WFE but mostly to growth in trading activity 4.
1
10
Billion contracts
1999
2000
2001
2002
2003
2004
2005
2006HI
800 700 600 Million contracts 500 400 300 200 100 0 1999 2000 282 232
2001
2002
2003
2004
2005
Jun 2006
* Figures in each period are only summations of the available gures of exchanges covered in that period, which may vary (eg 58 in 1999 vs 59 in June 2006). ** Open interest gures are not adjusted for multiple counting of fungible products listed on more than one exchange. Nevertheless, such cases are relatively very small. Source: Futures Industry Association
The FIA is a membership organisation for which regular members are US-registered Futures Commission Merchants (FCMs). US and international exchanges and clearing houses as well as other intermediaries may apply as associate members. There are currently 39 exchange associate members. Statistics maintained by FIA include exchanges that are not its associate members. Global exchange derivatives volume in this article refers to the aggregate trading volume of derivatives on exchanges with data maintained by FIA. Global equity market in this article refers to the equity markets of members of the WFE. For instance, the volume of KOSPI 200 options on Korea Exchange (KRX) rose from 80 million contracts in 1999 to 2,535 million contracts in 2005, representing an annual growth rate of 78 per cent. This contract contributed 25 per cent of global derivatives volume in 2005. For the equity market, excluding the 10 WFE member exchanges which joined between 1999 and 2005, the compound annual growth rate of the global equity market for the period was 7 per cent.
2 3 4
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43
The FIA currently compiles statistics on the contract volume and open interest of derivative products offered by 59 exchanges, including most of the worlds major derivatives exchanges (see Appendix 1). Based on the FIA statistics, this article examines the relative position of HKEx among global exchanges and compares HKExs volume with exchanges offering similar product types.
20
10 0
1999
2000
2001
2002
2003
2004
2005
2006HI
* Figures in each period are only summations of the available gures of exchanges covered in that period, which may vary (eg 46 in 1999 vs 51 in June 2006). Source: World Federation of Exchanges
* Others are derivatives on weather, lumber, fertiliser, plastics, commodity indices, etc. Source: Futures Industry Association
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October 2006
4
3,000 2,500
Million contacts
2,000
1,500
1,249 1,090
1,000
758
675 468 449 269 205 202 199 163 145 132 108 104 99 26
500
Korea Exchange
Euronext
Eurex
BOVESPA, Brazil
Pacic Exchange
OMX Exchanges
Million contacts
BM&F, Brazil
68
66
Korea Exchange
Euronext
Eurex
BOVESPA, Brazil
Pacic Exchange
OMX Exchanges
BM&F, Brazil
HKEx
HKEx
19
October 2006
45
Million contacts
68
19
Korea Exchange
Euronext
Eurex
BOVESPA, Brazil
Pacic Exchange
OMX Exchanges
46
October 2006
BM&F, Brazil
HKEx
Table 1 Approximate notional value# (US$m) 8,301,983 2,324,140 3,891,682 775,219 1,919,545 1,379,938 690,295 2,479,392 631,429 223,802 103,693
* The contract size of an index futures contract at the end of June 2006 is calculated by multiplying the month-end closing index by the contract multiplier. # Notional value of the contract volume during the period is an aggregate of the estimated notional values of monthly volumes. The monthly notional value is estimated by multiplying the month-end closing index by the contract multiplier and the monthly contract volume. Exchange rates used were month-end gures. Sources: Reuters for index closing levels, Hong Kong Monetary Authority for exchange rates, Futures Industry Association for contract volume.
Nevertheless, the WFE has endeavoured to maintain derivatives statistics of members of the International Options Market Association (IOMA) since 2003. IOMA members are mostly WFE members operating derivatives markets (see Appendix 2). The WFE statistics are number of contracts traded and notional value in each of the six selected product types (all are nancial derivatives) stock options, stock futures, stock index options, stock index futures, bond options and bond futures. However, not all exchanges are able to provide notional values on their products. Figure 6 shows the ranking of WFE/IOMA exchanges by notional value of stock index futures, for which most exchanges had data available, for the rst half of 2006. HKEx ranked 8th out of 28 exchanges for which data was available 5.
6
16,000 14,000 12,000
Ranking of WFE/IOMA exchanges by notional value of stock index futures (Jan - Jun 2006)
14,473
US$ billion
9,232
3,092
2,303 1,892 1,162 886 755 540 459 278 277 271 206 167
96
26
22
0.3
Euronext.liffe
Singapore Exchange
5 Of
these exchanges, 25 were among the 33 exchanges with statistics on stock index futures maintained by FIA (see Appendices 1 and 2).
Korea Exchange
Eurex
Bourse de Montral
Borsa Italiana
Wiener Brse
TAIFEX, Taiwan
Oslo Brs
HKEx
OMX
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Appendix 1. List of exchanges covered by FIA statistics and their traded derivatives (as of June 2006)
Financial derivatives Exchange Equity index futures Equity index options Stock futures Stock options Interest rate products Currency products Nonnancial derivatives
1. 2. 3. 4. 5. 6. 7. 8. 9.
American Stock Exchange Australian Stock Exchange Bolsa de Mercantile Futures, Brazil* Borsa Italiana (Italian Derivatives Market)* Boston Options Exchange Bourse de Montral* BOVESPA, Brazil Budapest Stock Exchange, Hungary* Bursa Malaysia Derivatives Berhad*
10. CBOE Futures Exchange* 11. Central Japan Commodity Exchange* 12. Chicago Board of Trade* 13. Chicago Board Options Exchange* 14. Chicago Mercantile Exchange* 15. Dalian Commodity Exchange, China* 16. Eurex* 17. Eurex US* 18. Euronext* 19. Fukuoka Futures Exchange, Japan 20. HKEx* 21. ICE Futures, UK* 22. International Securities Exchange 23. JSE, South Africa* 24. Kansai Commodities Exchange, Japan 25. Kansas City Board of Trade, USA* 26. Korea Exchange* 27. London Metal Exchange, UK* 28. MEFF Renta FIJA of BME Spanish Exchanges* 29. MEFF Renta Variable of BME Spanish Exchanges* 30. Mercado A Termino De Buenos Aires (MATBA) 31. Mercado A Termino De Rosario (ROFEX)* 32. Mexican Derivatives Exchange (MEXDER)*
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October 2006
Financial derivatives Exchange Equity index futures Equity index options Stock futures Stock options Interest rate products Currency products
Nonnancial derivatives
33. Minneapolis Grain Exchange, USA* 34. National Stock Exchange of India* 35. New York Board of Trade* 36. New York Mercantile Exchange* 37. New Zealand Futures Exchange 38. OMX Exchanges* 39. OneChicago* 40. Osaka Mercantile Exchange 41. Osaka Securities Exchange 42. Oslo Brs 43. Pacic Exchange 44. Philadelphia Stock Exchange 45. Singapore Exchange (SGX)* 46. Shanghai Futures Exchange* 47. Sydney Futures Exchange* 48. Taiwan Futures Exchange (TAIFEX)* 49. Tel-Aviv Stock Exchange 50. The Tokyo Commodity Exchange* 51. Tokyo Financial Exchange* 52. Tokyo Grain Exchange*# 53. Tokyo Stock Exchange* 54. Turkish Derivatives Exchange 55. Warsaw Stock Exchange 56. Wiener Brse, Austria 57. Winnipeg Commodity Exchange, Canada* 58. Yokohama Commodity Exchange, Japan# 59. Zhengzhou Commodity Exchange, China Total number of exchanges
Products
33 31 19 26 26 16 29
Yokohama Commodity Exchange merged into Tokyo Grain Exchange in April 2006.
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Appendix 2. List of exchanges and their selected derivatives covered by WFE derivatives statistics (as of June 2006)
Exchange 1. 2. 3. 4. 5. 6. 7. 8. 9. American Stock Exchange Athens Derivatives Exchange Australian Stock Exchange BME Spanish Exchanges Bombay Stock Exchange Borsa Italiana Bourse de Montral BOVESPA, Brazil Budapest Stock Exchange, Hungary Stock index Stock index futures options Stock futures Stock options 29 31 17 26 16 8 Bond futures Bond options
10. Buenos Aires Stock Exchange 11. Bursa Malaysia Derivatives Berhad 12. Chicago Board of Trade 13. Chicago Board Options Exchange 14. Chicago Mercantile Exchange 15. Eurex 16. Euronext.liffe 17. HKEx 18. JSE, South Africa 19. Korea Exchange 20. Mexican Derivatives Exchange (MEXDER) 21. National Stock Exchange of India 22. OMX Exchanges 23. Osaka Securities Exchange 24. Oslo Brs 25. Philadelphia Stock Exchange 26. Santiago Stock Exchange 27. Singapore Exchange (SGX) 28. Sydney Futures Exchange 29. Taiwan Futures Exchange (TAIFEX) 30. Tel-Aviv Stock Exchange 31. Thailand Futures Exchange 32. Tokyo Stock Exchange 33. Warsaw Stock Exchange 34. Wiener Brse, Austria Total number of exchanges
Products
50
October 2006