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Derivatives Trading Saw Record Levels in 2011

March 07
01:06 2012

In 2011, the trading of derivative contracts on regulated exchanges around the world saw their highest levels to date against the back drop of high volatility, declining markets and the European debt crisis.

According to statistics from World Federation of Exchanges, more than 24 billion derivatives contracts traded last year on exchanges. This can be broken down into 11.9 billion futures contracts and 12.9 billion options contracts.

This compares to 2010’s contract numbers of 22 billion.

While 2011 saw derivatives trading at its greatest levels, the growth rate declined to 11 percent from 2010’s 25 percent figure.

Contributing to the decline was a 32 percent drop in Chinese commodity trading as compared to 2010’s numbers. For the year, commodity futures represented the sole asset class to incur a decline in overall volume to 2.8 billion in 2011, down from the previous year’s 2.9 billion number.

However, WFE reported growth from rising volumes in stock index options and futures, along with exchange-traded-fund (ETF) options. Traders used these vehicles to hedge positions in a market filled with challenging global uncertainty and volatility.

In addition, the recent WFE report noted, “The relative preference for indices or ETFs underlyings compared to single stocks could also be interpreted similarly. Interest rates derivatives confirmed the rebound observed in 2010 and continued to grow in 2011 despite factors generically seen as unfavorable – low interest rates environments, no economic growth and credit expansion – in certain regions.”

The data from the report came from the WFE’s exchange members who include 54 equity, options and futures exchanges around the world, as well as other derivative marketplaces.

Equity market volumes drop

While it was a great year for derivatives, the equity markets were hit hard in 2011. Global market capitalization values dropped 13.6 percent to $47 trillion–a number last seen at the end of 2009.

According to WFE’s report, the declines were steady across the globe through the three major time zones. This included declines in the Asia-Pacific, Europe, Middle-East and Africa, and the Americas of 15.9 percent, 15.2 percent and 10.8 percent respectively.

The majority of WFE’s members did see market capitalization declines but the following exchanges actually saw increases in their capitalization: Irish, Indonesian, Philippines and Mauritian.

In April, WFE will release a more detailed report.

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