WFE/IOMA Derivatives Market Survey Romain Devai Grégoire Naacke

Transcription

1 WFE/IOMA Derivatives Market Survey 2012 Romain Devai Grégoire Naacke May 2013

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3 International Options Market Association (IOMA) 2012 Derivatives Market Survey Table of Contents Introduction... 2 The global derivatives market Equity derivatives Equity derivatives trading Single Stock Options Single Stock Futures Stock Index Options Stock Index Futures ETF Options Equity derivatives clearing Interest rate derivatives Interest rate derivatives trading STIR Options and Futures LTIR Options and Futures Interest rate derivatives clearing Currency derivatives Commodity derivatives Other derivatives CDS clearing Annex 1 Trading Statistics Annex 2 Clearing Statistics 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. WFE/IOMA Derivatives Market Survey

4 INTRODUCTION This report is the result of the annual survey conducted by the World Federation of Exchanges on worldwide derivative markets. The survey was compiled from questionnaire responses sent by exchanges and clearinghouses as well as 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. It deals with the trading and clearing of derivatives products and covers 52 trading venues and 47 clearinghouses. Some of the exchanges trade in a wide range of derivatives contracts, while many specialize in a single area of the market. The trading figures gathered comprise a full set of indicators (number of traded contracts, notional value of traded contracts, open interest, notional outstanding amounts, number of trades and paid premium) and are broken down into fourteen main product lines: Single Stock Options and Futures Stock Index Options and Futures Exchange Traded Funds Options and Futures Short-term interest rate (STIR) Options and Futures Long-term interest rate (LTIR) Options and Futures Currency Options and Futures Commodity Options and Futures Other derivatives Options and Futures The average for the number of different product lines per exchange is 5.25 and the median is 5. Johannesburg Stock Exchange, with 13 product lines, is the exchange that offers the highest number of product lines. At the other end of the spectrum, 7 exchanges offer only one class of product, the majority being Asian exchanges offering commodity futures. One exchange, namely China Financial Futures Exchange, only offers one contract. WFE/IOMA Derivatives Market Survey

5 Number of product lines per exchange Zhengzhou Commodity Exchange Tokyo Commodity Exchange (TOCOM) Shanghai Futures Exchange Multi Commodity Exchange of India ELX Dalian Commodity Exchange China Financial Futures Exchange United Stock Exchange of India One Chicago MCX SX London Metal Exchange ICE Futures Europe ICE Futures Canada Bolsa de Comercio de Buenos Aires Boston Options Exchange (TMX Group) Wiener Börse Warsaw Stock Exchange Turkish Derivatives Exchange Tokyo Financial Exchange Inc. Rofex Oslo Børs International Securities Exchange (ISE) Bursa Malaysia Derivatives (BMD) BSE Limited Athens Exchange Singapore Exchange NASDAQ OMX (US markets) LSE Group JPX (Osaka Securities Exchange) Chicago Board Options Exchange Thailand Futures Exchange (TFEX) Tel-Aviv Stock Exchange MEFF JPX (Tokyo Stock Exchange) ICE Futures U.S. Budapest Stock Exchange Bolsa de Valores de Colombia NYSE Euronext (US markets) TAIFEX National Stock Exchange of India NASDAQ OMX Nordic Exchanges Korea Exchange Hong Kong Exchanges and Clearing Moscow Exchange Montréal Exchange (TMX Group) Australian Securities Exchange MexDer CME Group BM&FBOVESPA NYSE Liffe (European markets) Eurex Johannesburg Stock Exchange List of product lines - Single Stock Options - Single Stock Futures - Stock Index Options - Single Index Futures - ETF Options - ETF Futures - STIR Options - STIR Futures - LTIR Options - LTIR Futures - Currency Options - Currency Futures - Commodity Options - Commodity Futures WFE/IOMA Derivatives Market Survey

6 Number of trading venues by product line 01. Single Stock Options 02. Single Stock Futures 03. Stock Index Options 04. Stock Index Futures 05. ETF Options 06. ETF Futures 07. STIR Options 08. STIR Futures 09. LTIR Options 10. LTIR Futures 11. Currency Options 12. Currency Futures 13. Commodity Options 14. Commodity Futures Most of the exchanges do not have a trading floor. Only in some US exchanges, the share of floor trading (by number of contracts traded) versus electronic systems appears to be significant: 30% for NASDAQ OMX US, 27% for CBOE, and 10% for CME Group. For CME options it decreased from 70% to 60% between 2011 and Share of Open Outcry versus Electronic transactions on CME Group volumes Futures Options Combined Interest Rate 1.4% 1.6% 74.5% 82.2% 14.9% 16.3% Equity Index 0.7% 0.7% 14.1% 23.4% 1.9% 2.4% Metals 1.9% 2.2% 41.5% 45.5% 6.2% 7.1% Energy 0.5% 0.8% 49.4% 59.8% 4.4% 5.9% FX 0.4% 0.3% 21.8% 25.7% 1.4% 1.4% Commodities & Alternative Inv. 6.3% 9.1% 63.5% 77.4% 18.4% 23.1% GRAND TOTAL 1.5% 1.7% 59.7% 69.8% 9.7% 11.0% WFE/IOMA Derivatives Market Survey

7 Most of the exchanges, except in China and India, have a designated class of participants who are responsible for providing liquidity. Among those who answered the question about compensation method used for liquidity providers, 100% are using fee incentives, 25% participation rights and 18% bandwidth. Compensation method used by exchanges for liquidity providers Participation rights Fee incentives Bandwidth Other Americas 50% 100% 17% 67% Asia Pacific 0% 100% 0% 29% EAME 22% 100% 33% 22% Total 23% 100% 18% 36% A question was also asked to exchanges about the order of magnitude of business brought to the market by Direct Market Access (DMA), Hedge Funds or High Frequency Traders but only a few exchanges were able to answer. In the United States, HFT activity is estimated to be higher in electronically-traded ETF options (e.g., SPY, IWM, QQQ, etc.) and the most active individual equity option classes. Tabb Group estimates that High-frequency trading strategies in options markets account for almost 60% of the total volumes in the US of which 45% comes from market-making firms 1. High-Frequency Trading share in US Listed Options Markets 70% 60% 50% Prop/Other HFT Market Making HFT 10% 13% 14% 40% 8% 30% 5% 7% 20% 10% 26% 27% 34% 43% 45% 45% 0% P Source: TABB Group In the United States, Hedge Funds participation is generally higher in index and volatility options, as well as active ETF option classes. 1 US Options Market Making 2013: Scale, Scope and Survival February 2013 Andy Nybo, Tabb Group WFE/IOMA Derivatives Market Survey

8 In order to evaluate the concentration of volumes among most active members, a question was asked about the share represented by the 5 and 10 most active members. Results show a very high concentration. It was less pronounced in Asia Pacific region and slightly decreased in As noted in the WFE annual cost and revenue survey 2, the concentration is higher on derivative markets than on cash markets. The share of 5 and 10 most active members in volumes was in 2011 almost 10% higher on derivatives markets than on cash markets. Percentage of the total trading volume represented by the 5 and 10 most active members 5 most active members 10 most active members 80% 70% 69% 67% % 68% % 60% 49% 50% 49% % 50% % 43% 40% 36% 34% 50% 52% 51% 62% 61% 30% 40% 20% 10% 30% 20% 10% 0% Americas Asia Pacific EAME Total 0% Americas Asia Pacific EAME Total WFE Cost & Revenue Survey Romain Devai and Grégoire Naacke November WFE/IOMA Derivatives Market Survey

9 THE GLOBAL DERIVATIVES MARKET 21 billion Exchange Traded Derivatives (ETD) contracts (10 billion options and 11 billion futures) were traded on exchanges worldwide in 2012 (against 25 billion in 2011). It is the first time since 2004 that the global number of derivatives traded on-exchange decreased. Moreover this decrease of volumes was significant (-15%) and concerned all the asset classes except commodity derivatives and all the regions. The first quarter of 2013 was much more encouraging (+13.7% excluding Kospi 200 options), suggesting that the year 2013 should experience a significant volume recovery. Equity (excluding Kospi 200 options), interest rate, currency and commodity derivative, all experienced positive volume growth rate compared to first quarter of 2012 (respectively +5.2%, +8.4%, +40.7% and +46.8%). As opposed to 2011, there were more futures contracts traded compared to options in Excluding Kospi 200 options, the highest decrease in 2012 was observed in EAME region (-12.3% against -7.3% in Americas and -4.5% in Asia Pacific). Number of ETD traded worldwide (bn contracts) 25 Other Commodity Currency Interest Rate Equity WFE/IOMA Derivatives Market Survey

10 Evolution of the volumes breakdown since % 80% 60% by underlying asset % 20% % 100% 80% Commodity Currency Interest Rate Equity by region % 40% % 0% 100% 80% EAME Asia Pacific Americas by product % 40% 20% 0% Futures Options WFE/IOMA Derivatives Market Survey

11 Number of ETD traded worldwide (millions of contracts) 1st Quarter /2011 vs Q1_2012 vs Q4_2012 Single Stock Options % -2.8% +6.5% Single Stock Futures % +14.2% -1.0% Stock Index Options % -39.7% +5.7% Stock Index Options (exc. Kospi 200) % +9.1% +4.5% Stock Index Futures % +2.8% +7.4% ETF Options % +22.6% +22.9% ETF Futures % - Total Equity % -11.5% +7.8% Total Equity (exc. Kospi 200 options) % +5.2% +7.7% STIR Options % Total IR opt Total IR opt. LTIR Options % -2.6% +32.3% STIR Futures % Total IR fut. Total IR fut. LTIR Futures % +11.1% +30.1% Total Interest Rate % +8.4% +30.5% Currency Options % +72.4% +16.6% Currency Futures % +34.6% +4.0% Total Currency (1) % +40.7% +6.3% Commodity Options % -6.4% +10.3% Commodity Futures % +51.9% +8.8% Other Commodity Derivatives % - Total Commodity (1) % +46.8% +8.9% Other Options % - - Other Futures % - - Other Derivatives % - - Total "Other" % - - Grand Total (1) % +1.4% +11.1% Grand Total (exc. Kospi 200 options) % +13.7% +11.1% (1) Including only WFE members for 1st quarter 2013 Equity derivatives: The 19.5% decrease in equity derivatives was partly explained by the sharp drop of number of index options traded on Korea Exchange following the multiplication by five of the size of the newly listed contracts on KOSPI 200 since March Excluding Kospi 200 options, the decline in equity derivatives was: -7.5%. Interest rate derivatives: Interest rates derivative volumes also declined (-15%). Factors generically seen as unfavorable for interest rates derivatives (low interest rates environments, no economic growth and no credit expansion) continue to prevail in certain regions and could explain that trend. Currency derivatives: Following sharp decrease in India where the volumes are very significant due to the small size of the contracts traded, the currency derivatives segment experienced the highest decrease in 2012 (-23%). Commodity derivatives: Driven by mainland Chinese exchanges 3 and by the transfer of OTC energy swaps to futures by ICE in the United States, the commodity derivatives market was the only one that grew significantly in 2012 (+18%). It overtook the currency derivatives market in terms of number of traded contracts. 3 Dalian Commodity Exchange, Shanghai Futures Exchange and Zhengzhou Commodity Exchange WFE/IOMA Derivatives Market Survey

12 1 EQUITY DERIVATIVES 1.1 Equity derivatives trading The number of traded contracts declined by 19.5% in 2012 (-7.5% excluding Kospi 200 options). The share of equity products in total number of derivative contracts traded remains dominant but decreased to 58% (compared to 61% in 2011 and 67% in 2009). This decline in equity derivatives volumes mirrors the one in the value of cash equities traded and is also probably explained by the significant decrease in volatility observed in Volatility indices decreased significantly in 2012, except in Japan, to end the year at relatively low levels. S&P 500 Volatility (VIX): - 23% (13.02 historical low level) EURO STOXX 50 Volatility: -33.6% (21.35) and FTSE100 Volatility Index: -19.7% (18.05) Nikkei Stock Average Volatility Index : + 4.5% (22.45) and Hang Seng Volatility Index : -30.2% (17.19) Despite the drop in volumes, the number of open positions continued to increase significantly for futures (+15% for single stock futures and +7% for index futures), suggesting that the need for hedging against stock price movements remains important. Number of equity ETD traded worldwide (bn contracts) ETF Options 1.7 Stock Index Futures 1.2 Stock Index Options Single Stock Futures Single Stock Options WFE/IOMA Derivatives Market Survey

13 Millions of contracts traded Millions of contracts traded Millions of equity derivative contracts Millions of equity derivative contracts The observation of monthly volumes in the United States and Europe in comparison with number of trades on cash markets confirms that the activity on cash markets is one of the main drivers for Equity derivatives volumes. Comparison of volumes on cash and derivative markets in the US and Europe Q Q Q3 United States Equity derivatives traded Cash OEB trades 2011 Q Q Q Q Q Q Millions of cash EOB trades Q1 Europe (Ex. stock futures) Equity derivatives traded Cash OEB trades 2011 Q Q Q Q Q Q Q Q Millions of cash EOB trades The evolution of volumes on equity derivative markets is also highly correlated with the volatility of stock prices as it is shown in the following graphs. Nevertheless in the first quarter of 2013, the volumes seemed to recover whereas the volatility on stock markets continued to decrease, suggesting that the cash markets influence is greater than the volatility one. Comparison of equity derivatives volumes and volatility in the US and Europe United States Europe (Eurex and NYSE Liffe exc. stock futures) Equity derivative volumes in the US VOLATILITYS&P500 (^VIX) Volatility index level Single stock opt. and index opt. & fut. traded on Eurex and NYSE Liffe EURO STOXX 50 Volatility Index Volatility index level Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1 0 The correlation of equity derivative markets activity with activity on cash markets and stock prices volatility is much less pronounced for single stock futures. As we will see in the section of the report dedicated to single stock futures, they stand out from other equity derivative products for several reasons: volumes are mainly concentrated in Europe, the majority of trades are OTC registered by the exchanges and they are estimated to only account for a very small part of total equity derivatives notional outstanding amount. WFE/IOMA Derivatives Market Survey

14 EAME ASIA PACIFIC AMER. The comparison of the average size of contracts traded between various type of equity derivatives (measured by the ratio notional value / number of contracts traded) for main exchanges shows that single stock and ETF derivatives are mostly used by retail investors and traditional index products are used by institutions. In the United States, CBOE confirms that retail participation is generally higher in ETF and individual equity options, and lower in cash index and volatility contracts. Nevertheless, in some regions, especially in Asia, the size can differ significantly from international standards. It is worth noting that for KOSPI 200 options, the world biggest index options in terms of volumes traded, starting from March 2012 the multiplier was increased from 100,000 to 500,000. The application was made step-by-step from March 9, 2012 and the uniform application stared from June 15, Even with this five time multiplication, the size of KOSPI 200 options will remain significantly lower than index options traded in the United States and Europe. Average size and turnover velocity of main equity derivative exchanges Ratio Notional Value / Volume ('000 USD) Stock Opt. Stock Fut. Index Opt. Index Fut. ETF Opt. Ratio Volume / (# contracts) BM&FBOVESPA CBOE CME Group KRX NSE India BSE Ltd ASX Taifex HKEX CFFEX Eurex Moscow NYSE Liffe Nasdaq OMX LSE Group Meff JSE Tel-Aviv SE Average (1) (1) Non-weighted average Stock Opt. Stock Fut. Index Opt. Index Fut. ETF Opt. WFE/IOMA Derivatives Market Survey

15 According to BIS statistics, the outstanding amounts for ETD and OTCD tended to follow similar trends. No transfer was observed from one segment to another. For ETD, it seems that BIS statistics are only taking into account index options and futures whereas WFE estimates that single stock and ETF options account for about half of the total notional outstanding amounts of equity ETD worldwide. The 2012 increase of OTCD notional outstanding amounts (+4.5%) was driven by forward and swaps (+17.6%). OTCD options remained stable. Notional outstanding amounts of on-exchange and OTC equity derivatives (billion USD) OTC On-exchange Source: BIS WFE/IOMA Derivatives Market Survey

16 Cleared contracts (millions) Cleared contracts (millions) Single Stock Options In 2012, the number of single stock options traded decreased by 1.7% (-2.8% rebasing ASX volumes). As noted last year, the 2012 growth rate was partly biased by two opposite effects: in May 2011, the size of ASX contracts was divided by 10, but on the other hand, most contracts size increased on Eurex in the course of The Americas region still dominates the single stock options market with 82% of the traded volumes. In this region, the volumes remained stable (+0.1%) thanks to BM&FBOVESPA and ISE whose volumes growth offset the decreases observed in NASDAQ, NYSE and CBOE. The most significant drop in volumes was observed in EAME (-19%). The information on paid premium is unfortunately not available for all exchanges. But for those for which the figures were provided, it is worth noting that the growth trends were not correlated with volumes. For example on the three main US exchanges, while the volumes decreased by 6.2%, the amount of paid premium increased by 23%. Conversely, on BM&FBOVESPA, the biggest market for single stock options, paid premium decreased by 6.9% despite the 11% growth rate of volumes. One explanation for the increased premium in the United States was probably that the stock prices rose significantly in 2012 which, on average should result in higher premiums, assuming no change in volatility. In 2012, index volatility trended lower, but that was accompanied by lower implied correlations. Thus, the falling index volatility can go with stable or even rising equity volatility. Evolution of number of contracts traded, number of transactions and paid premium in the US Premiums (billion USD) Transactions (millions) Cleared Contracts Total Premiums Cleared Contracts Cleared Transactions WFE/IOMA Derivatives Market Survey

17 The number of trades also increased significantly in 2012 for the four biggest exchanges, namely BM&FBOVESPA, NASDAQ OMX US, NYSE Liffe US and CBOE. The increasing number of trades in the US, while number of contracts traded decreased, could be an indication of increasing HFT, but the aggregated figures have to be interpreted with caution due to the fact that contracts of different sizes and characteristics are gathered in the same basket. As noted in the introduction, Tabb Group 4 estimates that the market share of HFT in the US options markets is about 60% (of which 45% comes from marketmaking firms) and is still increasing. Moreover, according to CBOE, HFT activity is generally higher in electronically-traded ETF options (e.g., SPY, IWM, QQQ, etc.) and the most active individual equity option. In 2012, the weight of Apple in stock options volumes on the three main US exchanges (Nasdaq OMX, NYSE Liffe US and CBOE) increased very significantly, from 4.5% in 2011 to 8.1% in Apple is a very high priced stock and activity in this stock is characterized by high paid premium with relatively small trade sizes. On the CBOE, Apple was accounting in 2012 for 10.8% of single stock options volumes (against 4.4% in 2011), 20.9% of the number of trades (against 8.9% in 2011) and 50.8% of paid premium (against 18.2% in 2011). The 2012 increase of number of trades and paid premium in the United States was largely driven by Apple. Top 10 exchanges by number of single stock options contracts traded in 2012 Millions of contracts ('000 Exchange Notional Value (bn USD) Number of trades Option Premium traded contracts) ('000) (bn USD) 2012 AGR 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 BM&FBOVESPA % % % % 30-21% 2 NASDAQ OMX (US markets) 644-8% NA NA NA NA % % 3 NYSE Euronext (US markets) 595-6% NA NA NA NA % % 4 Chicago Board Options Exchange 494-4% % % % % 5 International Securities Exchange 457 6% NA NA NA NA NA NA NA NA 6 Eurex % % % % 35-27% 7 Australian Securities Exchange % % % NA NA NA NA 8 NYSE Liffe (European markets) % % % % 24-36% 9 Boston Options Exchange 95 3% NA NA NA NA NA NA 17-4% 10 National Stock Exchange of India 57 72% % % % 6 64% Others % % % % 9-58% Total % % NA NA % 724 6% NB: Dividend trades are included for US exchanges 4 US Options Market Making 2013: Scale, Scope and Survival February 2013 Andy Nybo, Tabb Group WFE/IOMA Derivatives Market Survey

18 The most actively traded single stock options (1) in the world in 2012 Millions of Notional Open contracts Value Interest Exchange Products Number of trades Option Premium traded (bn USD) ('000) ('000) (mio USD) 2012 AGR 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 BM&FBOVESPA Petrobras PN % 427 7% % % % 2 BM&FBOVESPA Vale R Doce PNA 378-4% % % % % 3 BM&FBOVESPA OGX Petroleo % 58-6% % % % 4 CBOE Apple Inc % % % % % 5 NYSE Euronext (US) Apple Inc % NASDAQ OMX (US) Apple Inc % NYSE Euronext (US) Bank of America 33 4% CBOE Bank of America 25-1% 21-1% % 721 3% % 9 ASX Telstra Corp % % % 10 Eurex Deutsche Telekom 24-13% 28-19% % % 11 NASDAQ OMX (US) Bank of America 23-21% Eurex Nokia 17-27% 7-63% % % 13 NASDAQ OMX (US) Microsoft Corp % ASX BHP Billiton 17-29% % % 15 NASDAQ OMX (US) AT&T Inc % NASDAQ OMX (US) Pfizer 14 19% NASDAQ OMX (US) General Electric 14 6% NASDAQ OMX (US) Intel Corp % ASX CBA 12 27% % % 20 Eurex E.ON 12-31% 25-43% % % 21 Eurex Commerzbank 12-26% 3-66% % % 22 ASX XJO NASDAQ OMX (US) Verizon Com. 12 6% NYSE Euronext (US) Microsoft Corp. 11-5% LSE Group Gazprom 11-18% % BM&FBOVESPA BMFBOVESPA 11 13% 7 20% % % % 27 Eurex Daimler 10 11% 55 2% % % 28 NYSE Euronext (US) Citigroup Inc % NYSE Liffe (Europe) ING 10-33% 8-42% % % % 30 NASDAQ OMX (US) JPMorgan Chase & Co Total % (1) Excluding International Securities Exchange (ISE) WFE/IOMA Derivatives Market Survey

19 In 2012 in the United States, volumes of flexible stock options increased significantly (+23%) as well as paid premium (+46%), but their weight in the total number of options traded remains relatively low (0.29%). Number of single stock flexible options cleared by OCC Exchange Number of contractscleared ('000) Premiums (Mio USD) NYSE Amex NYSE Arca Options Chicago Board Options Exchange (CBOE) NASDAQ OMX PHLX Total flexible options on OCC Memo : Total single stock options on OCC Market share of flexible options 0.29% 0.22% 0.63% 0.32% 0.27% 0.22% 1.07% 0.59% Source : OCC According to a recent study by Tabb Group 5, Options Market-Making firms in the United States see the greatest growth potential in complex order books, VIX-related products, weekly options and narrower strike increments. They are less confident of the growth prospects in mini options, flex options and daily options. 5 US Options Market Making 2013: Scale, Scope and Survival February 2013 Andy Nybo, Tabb Group WFE/IOMA Derivatives Market Survey

20 1.1.2 Single Stock Futures Single stock future volumes decrease was more pronounced than for single stock options (-9%) but the number of open positions at the end of 2012 was 15% higher than one year before. Contrary to single stock options, single stock futures volumes are mainly located in EAME and Asia Pacific regions (99% of the volumes in 2012). Opposite trends were observed in those two regions: EAME volumes decreased by 15% (driven by RTS) while Asia Pacific volumes increased 16% (driven by Korea Exchange). It is worth noting that on those two Exchanges, the size of the contracts traded measured by the ratio notional value / number of traded is much smaller than on other exchanges (suggesting that they are more oriented to retail investors). On Eurex and NYSE Liffe (Europe) most of single stock futures traded are traded OTC but registered and cleared by the exchanges. On both European exchanges, the notional value of contracts traded declined while open interest increased sharply. As noted earlier, single stock futures differ from other equity derivatives by three main aspects: volumes are mainly located in EAME regions, single stock futures account for a small share of total notional outstanding amounts of equity derivatives and on the two main markets in terms of open interest, namely NYSE Liffe and Eurex, the great majority of trades are OTC trades registered on the exchanges. This indicates that they are most probably used by different type of investors and for different purposes and explains why the evolution trends observed are different. Top 10 exchanges by number of single stock futures contracts traded in 2012 Exchange Millions of contracts traded Notional Value (bn USD) ('000 contracts) Number of trades ('000) 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 NYSE Liffe (European markets) 247-2% % % 12-25% 2 Moscow Exchange % 91-43% % NA NA 3 Eurex % % % 35-61% 4 National Stock Exchange of India 153-5% 792-9% % % 5 Korea Exchange % 53 67% % % 6 Johannesburg Stock Exchange 29-43% 31 11% % NA NA 7 MEFF 21-23% 21-49% % 39-54% 8 Athens Exchange 13 73% 3-15% % % 9 LSE Group 6-50% 18-62% % 17-46% 10 One Chicago 5 43% NA NA NA NA NA NA Others 12 0% 22 8% 615 7% % Total % % % % WFE/IOMA Derivatives Market Survey

21 1.1.3 Stock Index Options Excluding Korea and BSE Ltd, the number of index options traded decreased by 11% (against - 36% including the two exchanges). Given the small size of contracts traded on both Korea Exchange and BSE Ltd, 11% also corresponded to the decrease of total notional value for index options worldwide. As noted last year, Korea Exchange needs to be excluded from the scope for the calculation of a consistent volume growth rate due to the fact that in March 2012, Korea Exchange decided to multiply by five the size of the newly listed contract. Ceteris paribus, volumes should on a mid-term horizon decrease five times compared with previous years. In the past, index options volumes were heavily influenced by KOSPI 200 options traded in Korea: they accounted for 64% of the index options volume traded worldwide in 2011 and 43% in The market share of KOSPI 200 options will continue to decrease in 2013, as the sizes changing occurred in the course of 2012 and were implemented progressively. On BSE Ltd. volumes were multiplied by more than 1000 on BSE 30 SENSEX index options following incentives offered by the Exchange and new index options on BSE 100 Index were introduced. It remains to be seen whether those high volumes remain after the end of the incentives. Looking at the 30 most active index options, we can see that all the indicators (volumes, open interest and premium) decreased significantly in 2012 contrary to other equity derivative products. Let s remind that US single stock options decrease of volumes was accompanied by paid premium that continued to increase and single stock and index futures open interest continued to increase in The global decrease of ETD notional outstanding amounts compared to OTCD, highlighted earlier in the study, was thus largely explained by index options. In last year report, a special focus had been added about index options and futures cross-listings. It is worth noting that in 2012 two cross-listed contracts were present among the 30 most actively traded index options in the world: Kospi 200 options traded on Eurex and Nikkei 225 options traded on Singapore Exchange. WFE/IOMA Derivatives Market Survey

22 Top 10 exchanges by number of stock index options contracts traded in 2012 Millions of contracts ('000 Exchange Notional Value (bn USD) Number of trades Option Premium traded contracts) ('000) (bn USD) 2012 AGR 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 Korea Exchange % % % % % 2 National Stock Exchange of India 820-6% % % % 37-33% 3 Eurex % % % % % 4 BSE Limited 235 NA NA 36-74% NA 5 NA 5 Chicago Board Options Exchange % % % % % 6 TAIFEX % % % % 10-28% 7 CME Group 59-2% % % % NA NA 8 Tel-Aviv Stock Exchange 57-34% % % % 18-39% 9 JPX (Osaka Securities Exchange) 49 8% NA NA % % 62-4% 10 NYSE Liffe (European markets) 39-25% % % % 46-21% Others 118 4% % % % 18-58% Total % % % % % The most actively traded stock index options in the world in 2012 Millions of Notional Open contracts Value Interest Exchange Products Number of trades Option Premium traded (bn USD) ('000 ('000) (mio USD) 2012 AGR 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 Korea Exchange Kospi % % % % % 2 NSE India CNX S&P NIFTY Options 803-8% % % % % 3 Eurex EURO STOXX % % % % 4 CBOE S&P 500 Index % % % % % 5 BSE Limited BSE 30 SENSEX % % 6 TAIFEX TAIEX Options % % % % % 7 BSE Limited BSE Tel-Aviv SE TA-25 Options 57-34% % % % % 9 Eurex DAX Options 52-24% % % % 10 JPX (Osaka) Nikkei % % % % 11 CME Group E-MINI S&P % % Moscow Exchange RTS Index Options 34-4% 98-15% % Eurex KOSPI % % NSE India CNX BANKNIFTY Options % % % % % 15 NYSE Liffe (Europe) FTSE 100 (EUROPEAN) 11-14% % % % 16 NYSE Liffe (Europe) AEX-INDEX 10-41% % % % % 17 BM&FBOVESPA Bovespa Stock Index % 7 38% % 13 57% CME Group S&P % 278 0% CBOE Nasdaq 100 Index % % % 219-6% % 20 NYSE Liffe (Europe) FTSE 100 (EUROPEAN) % % % % % 21 ISE All index options % CME Group EOM EMINI S&P % 46 20% NYSE Liffe (Europe) CAC 40 * (10 EURO) 5.0-5% % % % % 24 CBOE Russell 2000 Index % % % % % 25 Eurex SMI Options % % % % 26 CBOE S&P 100 Index % % 40-60% % % 27 Eurex EURO STOXX Banks % 27 53% % % 28 Singapore Exchange SGX Nikkei 225 Index % % CME Group EOW2 EMINI S&P % % NYSE Liffe (Europe) AEX-INDEX DAILY % % 4 57% % % Total % % % % % Total (Excluding Korea Ex. and BSE Ltd.) % WFE/IOMA Derivatives Market Survey

23 In last year report a special focus had also been added about mini index options. Some of them have better performed than standard options in 2012, but their weight in the total notional value most probably remains very small. Standard index option vs mini options Exchange Products Millions of contracts traded Notional Value (bn USD) Average size 2012 AGR 2012 AGR 2012 CBOE S&P 500 Index % % CBOE Mini S&P 500 Index % % CBOE Nasdaq 100 Index % % CBOE Mini Nasdaq 100 Index % % 630 CME Group S&P % CME Group E-MINI S&P % CME Group EOM S&P % CME Group EOM EMINI S&P % CME Group EOW2 S&P % CME Group EOW2 EMINI S&P % CME Group EOW1 S&P % CME Group EOW1 EMINI S&P % CME Group NASDAQ % CME Group E-MINI NASDAQ % CME Group DJIA % CME Group MINI $5 DOW % NSE India CNX S&P NIFTY Options % % NSE India Mini Option Contracts on CNX 0.93 S&P NIFTY 201% 2 192% Total Standard (CBOE + CME) % Total Mini (CBOE + CME) 48 7% WFE/IOMA Derivatives Market Survey

24 1.1.4 Stock Index Futures As for index options, the volumes of index futures traded both in number of contracts and in monetary value, decreased significantly in But, on the other hand, the open interest and notional outstanding amounts continued to increase suggesting that they are more often used for hedging purpose than index options. In Americas, the market is still dominated by CME Group that accounted for 85% of the region s volumes in 2012 and that experienced a 22% decrease of volumes and 5% increase of open interest. In EAME, all the exchanges with significant volumes experienced quite similar decrease of volumes in The Asia Pacific region was less affected than the others by the 2012 volume drop thanks to Osaka Securities Exchange that increased 9% and China Financial Futures Exchange where volumes more than doubled in The impressive growth of China Financial Futures Exchange that only offers one contract since 2010 allowed the exchange to reach the third position in terms of notional value in CSI 300 futures traded on China Financial Futures Exchange are the only financial futures traded in Mainland China. In 2012, the number of CFFEX retail clients was accounting for 98% of the total number of clients. In 2012, retail trading accounted for 96.5% of the total transaction volume and 63.9% of the total daily average open interest. As for index options, it is interesting to note that some cross-listed index futures (traded on Singapore Exchange) were in 2012 in the list of the 30 most actively traded index futures. Top 10 exchanges by number of stock index futures contracts traded in 2012 Millions of contracts ('000 Exchange Notional Value (bn USD) Number of trades traded contracts) ('000) 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 CME Group % % % % 2 Eurex % % % % 3 Moscow Exchange % % % NA NA 4 JPX (Osaka Securities Exchange) 150 9% % % % 5 National Stock Exchange of India % % % % 6 China Financial Futures Exchange % % % NA NA 7 NYSE Liffe (European markets) 84-14% % % % 8 Singapore Exchange 67-3% NA NA % NA NA 9 BM&FBOVESPA 64 26% % % % 10 Korea Exchange 62-28% % % % Others % % % % Total % % % % WFE/IOMA Derivatives Market Survey

25 The most actively traded stock index futures in the world in 2012 Millions of Notional contracts Value Exchange Products Open Interest Not. Outs. Amounts Number of trades traded (bn USD) ('000 (bn USD) ('000) 2012 AGR 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 CME Group E-MINI S&P % % Moscow Exchange RTS Index Futures % % % Eurex EURO STOXX 50 Index % % % % JPX (Osaka) Nikkei 225 Mini % % % % 5 CFFEX CSI 300 futures % % % NSE India CNX S&P NIFTY Futures 80-35% % % % % 7 CME Group E-MINI NASDAQ % % Korea Exchange KOSPI 200 Futures 62-28% % % % 9 BM&FBOVESPA Mini Bovespa Index 39 48% % % % % 10 NYSE Liffe (Europe) CAC 40 INDEX 38-12% % % % 11 Eurex DAX Futures 37-17% % 157 1% % CME Group MINI $5 DOW 31-5% % NYSE Liffe (Europe) FTSE 100 (NEW) 27-18% % 603 1% % 14 Singapore Exchange SGX Nikkei 225 Index 25-13% % TAIFEX TAIEX Futures 25-20% % 59-14% % % 16 BM&FBOVESPA BOVESPA Index Future 22 3% 681 2% 256 8% % % 17 NSE India CNX BANKNIFTY Futures 22 27% % 43-42% % % 18 JPX (Osaka) Nikkei 225 Futures % % % % 19 TAIFEX Mini-TAIEX Futures % % 27-25% % % 20 Singapore Exchange SGX MSCI Taiw an Index % % Singapore Exchange SGX S&P CNX Nifty Index % % NYSE Liffe (Europe) FUTURE AEX INDEX % % 96 89% % 23 Eurex EURO STOXX Banks % 62 39% % % NSE India Mini CNX S&P NIFTY % 19-37% 21-61% 46-50% % 25 Eurex SMI Futures % % % % Singapore Exchange SGX FTSE China A % % BSE Limited BSE 30 SENSEX % % 1-91% 0-99% % 28 CME Group E-MINI MIDCAP % % CME Group NIKKEI 225 (YEN) % % NYSE Liffe (Europe) FTSE 100 (NEW) % 495-4% % Total % % % WFE/IOMA Derivatives Market Survey

26 1.1.5 ETF Options The ETF options market remains mainly a US market. This reflects the uneven development of the underlying market of ETFs which first appeared at the beginning of the 1990 s in the US, and only ten years later in Europe. In 2012 in the United States, the number of ETF options traded decreased even more sharply (-19%) than the number of index options (-10%). The amount of premium paid also dropped by 36%. As noted earlier, looking at CBOE figures, the average size of ETF options (10 K$) is very close to that of single stock options (11 K$) and much smaller than index options one (138 K$). This suggests that they are more retail oriented than index options. Top 5 exchanges by number of ETF options contracts traded in 2012 Exchange Millions of contracts Notional Value (bn USD) ('000) Number of trades Option Premium 2012 AGR 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 NYSE Euronext (US markets) % NA NA NA NA % 50-40% 2 NASDAQ OMX (US markets) % NA NA NA NA % 62-37% 3 Chicago Board Options Exchange % % % % 43-33% 4 International Securities Exchange % NA NA NA NA NA NA NA NA 5 Boston Options Exchange 50 6% NA NA NA NA NA NA 7-22% Others 7 7% 14-5% % 42-23% 0-18% Total % NA NA NA NA % % WFE/IOMA Derivatives Market Survey

27 1.2 Equity derivatives clearing In Europe, NYSE Liffe and Eurex are offering clearing and registration services for OTC trades. On NYSE Liffe, the dedicated platform is called BClear. On those two exchanges, OTC trades were accounting for 55% of the equity derivatives traded volumes in 2012 against 52% in 2011 and for 0.35% of the number of trades. Those OTC trades are thus much bigger than other on-exchange trades. The users of those platforms must accordingly be different users with different strategies. This explains why evolutions observed on single stock futures (where OTC trades account for 99% of the volumes) differ from other equity derivatives. Share of OTC trades registered by the exchanges in Eurex and NYSE Liffe volumes in Europe 100% 80% 60% % 20% 0% Single Stock Options Single Stock Futures Index Options Index Futures WFE/IOMA Derivatives Market Survey

28 2 INTEREST RATE DERIVATIVES 2.1 Interest rate derivatives trading In terms of notional outstanding amounts, the interest rate derivative market is the most important segment of derivative markets for both Exchange Traded Derivatives (ETD) and OTC Derivatives (OTCD). The ETD market is highly concentrated and the three main exchanges, namely CME Group, Eurex and NYSE Liffe experienced significant decrease of volumes in 2012 (-25% for STIR and -19% for LTIR) in a context of low interest rates environments, no economic growth and no credit expansion. On the other hand, on those three exchanges, open interest continued to increase significantly on the LTIR segment (+14% against -7% for STIR derivatives). The need for hedging against interest rate risk on the long run remains important. As for Equity derivatives, BM&FBOVESPA, which is the fourth biggest exchange in terms of volumes traded, stands out from other exchanges with a positive growth rate of volumes, open interest and number of trades. 4.0 Number of interest rate ETD traded worldwide (billions of contracts) STIR Options STIR Futures LTIR Options LTIR Futures WFE/IOMA Derivatives Market Survey

29 OTC derivatives The size of long term interest rate contracts (generally local currency) is much smaller than that of short term interest contracts (most of the time local currency). That is why - as it is shown in the following graph - short term interest rate derivatives account for such a large part of the notional value (86%) and notional outstanding amounts (96%) breakdown by Interest Rate product group of Volume Notional Value Notional Out. Am. Trades 13% 12% 2% 21% 3% 1% 1% 40% 41% 55% 53% 46% 41% 6% 65% 0% The market of interest rate derivatives is highly dominated by OTC products in terms of notional outstanding amounts due to the importance of interest swaps. In the United States and Europe, the recent OTC market regulation is expected to boost clearing of standardized IR derivatives and possibly transfer of volumes from OTCD to ETD. Part of OTC swap volume should migrate to like products in the ETD futures markets. Evolution of notional outstanding amounts of on-exchange and OTC interest rate derivatives (trillion USD) OTC swaps OTC forward rate agreements & opt. On-exchange fut. & opt On-exchange derivatives 0 0 Source: BIS In recent years, OTCD and ETD notional outstanding amounts seemed to have followed quite similar trends. ETD notional outstanding amount is largely driven by STIR segment due to the larger size of the contracts and their weight in total ETD interest rate derivatives (86%). WFE/IOMA Derivatives Market Survey

30 2.1.1 STIR Options and Futures Short Term interest rate derivatives are defined by an original term to maturity of underlying being equal to or less than 12 months. The two biggest contracts in terms of notional value, namely Eurodollar futures traded on CME Group and Three Month Euribor futures traded on NYSE Liffe, both experienced a sharp decrease of volumes (respectively -24% and -26%) but an increase of open interest (respectively +5% and +23%). The need for hedging against interest rate risk continues to increase significantly especially in Europe where uncertainties are greater. The third biggest exchange in terms of volumes traded, BM&FBOVESPA, accounts for 31% of global volumes and 51% of the open interest but only 2% the total notional value. Due to their smaller size (closer to standard LTIR contracts) BM&FBOVESPA contracts might be more easily accessible. Top 5 exchanges by number of short term interest rate* derivatives contracts traded in 2012 Millions of Notional Out. contracts ('000 Amounts Exchange Notional Value (bn USD) Number of trades traded contracts) (bn USD) ('000) 2012 AGR 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 CME Group % % % % % 2 NYSE Liffe (European markets) % % % NA NA % 3 BM&FBOVESPA 502 9% % % % % 4 MexDer 27-15% % % 53 NA 8-43% 5 NASDAQ OMX Nordic Exchanges 27 1% NA NA % NA NA NA NA Others 61-15% % % NA % Total % % % NA NA % * Original term to maturity of underlying being equal to or less than 12 months (treasury bills, deposits etc) The most actively traded STIR derivatives in the world in 2012 Millions of Notional Number of Exchange Products contracts Value ('000 trades traded (bn USD) contracts) ('000) 2012 AGR 2012 AGR 2012 AGR 2012 AGR 1 CME Group EURODOLLARS futures % % BM&FBOVESPA Interbank Deposits (ID) futures 341 6% % % % 3 NYSE Liffe (Europe) THREE MONTH EURIBOR futures % % % % 4 NYSE Liffe (Europe) THREE MONTH STERLING futures 115-1% % % % 5 BM&FBOVESPA ID Index options % % % 17-13% 6 CME Group EURO MIDCURVE options 86-5% % NYSE Liffe (Europe) THREE MONTH EURIBOR options 71-44% % % 53-16% 8 CME Group EURODOLLARS options 48-53% % BM&FBOVESPA ID x U.S. Dollar FRA 35 3% % % 10 BM&FBOVESPA Options on ID futures 17 84% % % 3 80% 11 NYSE Liffe (Europe) 3 Month EURIBOR MID CURVE op % % 850 8% 9-13% 12 NYSE Liffe (Europe) 3 Month STERLING options 9-58% % % 6-53% 13 NYSE Liffe (Europe) 3 Month EURIBOR 2 YEAR MID CURVE op NYSE Liffe (Europe) 3 Month EUROSWISS futures 6-22% % % % 15 NYSE Liffe (Europe) 3 Month STERLING MID CURVE op. 5-54% % % 3-57% Total % % - - WFE/IOMA Derivatives Market Survey