World Federation of Exchanges (WFE) publishes H1 2016 Market Highlights
The number of securitised products listed across global exchanges during the first half of 2016 has seen a decrease of 2.79% compared to the same period of 2015 with the value traded also falling by 30.1%, according to the World Federation of Exchanges (WFE) H1 2016 Market Highlights.
According to the trade body which represents more than 200 market infrastructure providers including exchanges and central counterparty clearing house (CCPs), cash equity markets experienced a decline of 24% in terms of value traded, and 6.9% in terms of number of trades in the first half of 2016 compared to the same period in 2015, while FX and commodities exchange traded derivatives led a 1.4% rise in all exchange-traded derivatives.
Despite the drop in activity around securitised products which include leverage and short, as well as synthetic exchange-trade products and funds (ETP/ETF), figures from global exchanges suggest that investors have significantly increased the use of these listed products, although the value traded may not necessarily reflect the underlying assets under management of those ETPs.
According to Siobhan Cleary (pictured), head of research & public policy at the WFE, the number of exchange traded products (ETPs) has been growing steadily over time. "We see more exchanges introducing these products as well as different varieties of the products (leverage/inverse) and underlyings," said Cleary. "ETPs were traditionally linked to equities but we see a whole range of new instruments linked to other asset classes made available in exchanges across pretty much every jurisdiction. In terms of number of ETF listings, the Emea region leads but Asia-Pacific and the Americas have also been growing."
According to Cleary, the recent bull-run and record high for the S&P 500 index has fuelled strong demand in US equities and derivatives trading in the first half of the year. Data released on Monday by the WFE revealed that the number of share trades in the first half of the year to June 30 in the Americas rose 23% to 3.7bn; while related derivatives instruments such as stock index options rose 25% to 302m contracts and stock index futures rose 24% to 436m contracts.
"As noted in the WFE's 2015 IOMA report, we've started to see a shift in the composition of global exchange traded derivatives activity with an increase in the number of commodity and currency contracts traded relative to other ETDs," said Cleary. "Looking at number of contracts traded creates some challenges in terms of comparability because different venues have different contract sizes and venues dominated by retail activity would tend to have smaller contract sizes. However, equity derivatives which used to account for the bulk of exchange traded derivatives activity have declined over time and stood at just over 50% of the overall activity at the end of 2015 while at the same time we have observed an uptick in trading of commodity and currency derivatives."
According to Cleary, much of the commodity derivatives activity has been driven by exchanges in the Asia Pacific region while the growth in currency derivatives is coming from some of the Asia Pacific exchanges and the Emea region.
"The Moscow Exchange, for example, has seen a large growth in activity in its currency derivatives offerings," said Cleary. "We don't comment or speculate on the reasons for this increased activity [but] exchanges globally are providing the infrastructure for investors to trade the products they need or want to access at a particular point in time."
According to the head of research at an ETP provider, the increase in currency derivatives trading activity is happening in countries where individual investors have constraints to hedge price or currency risk because of capital controls. "Exchanges have responded by making new instruments available through transparent listed venues," said the executive. "On the commodities side there has been a story, either running up or down, and exchanges have also provided instruments and products for investors to take views on long term economic activity or speculate when appropriate."
Exchange Traded Derivatives (ETD) volumes (as represented by number of contracts traded) ended this six-month period 1.4% up compared to the first half of 2015. This was fuelled mainly by increases in the number of commodity and currency derivatives traded, up 46.8% and 26.1% respectively, versus the same period in 2015.
Other key highlights in the WFE report show that global market capitalisation decreased 9.4% from H1 2015, to reach US$67.2tr compared with US$74.2tr. Asia-Pacific accounted for US$4tr of this decline, ending the half year at US$23.3tr, down 14.9% from the end of the first half of 2015. Emea exchanges were down US$1.8tr (a decline of nearly 10%) followed by the decline of US$1.1tr in the Americas (nearly 3.6%). The US$29.14tr market capitalisation as at end June 2016 in the Americas is, however, up slightly (4.3%) on the number at end 2015.
The report also showed that the value of share trading decreased 24.0% worldwide to US$44.9tr in the six-months to June 2016 compared with US$59.2tr in the same period in 2015; and that the total number of trades in H1 2016 decreased 6.9% from H1 2015.
Click in the link to read the WFE H1 2016 Market Highlights report.
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