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Exchange-Listed Derivative Volumes Boom

Cboe Global Markets had record yearly options volume in 2021 while CME Group reached an all-time high average daily volume during the year.

Cboe reported that total options volume for 2021 was three billion contracts, the highest yearly volume on record, and 19% more than in the previous year. As a result, Cboe’s ADV for options reached a new all-time high of 12.1 million contracts.

 Henry Schwartz, Cboe Global Markets.

Henry Schwartz, head of product intelligence at Cboe Global Markets, said in an email that the most significant growth in options trading over the past 18 months has been in single-stock options. These are a favorite of retail traders and Cboe saw increased trading activity in these when work-from-home became the norm for many people.

“Additionally, the advent of zero commission brokers, the massive market rally from the March 2020 lows, and widespread media coverage of meme stock action appear to be very conducive to trading,” added Schwartz. “The one question I have though, is how will retail traders respond to the recent pullback in many of the shares that had led this market higher ?โ€

CME Group also had record trading in equity index futures and options, including all-time high volumes in Micro E-Mini contracts on the Nasdaq 100, Russell 2000 and Dow Jones indices. Micro contracts provide an efficient way for market participants to hedge their risk more efficiently or more nimbly execute trading strategies.

Source: Cboe.

ICE reported that average daily volume for NYSE equity options was up 40% year-on-year in 2021.

SOFR contracts

CME Group said in a statement that it reached a record overall ADV which included an all-time high ADV in SOFR contracts.

Trading in futures and options based on risk-free rates increased over 2021 as regulators warned about a number of Libor rates ceasing to exist at the end of 2021. The US Alternative Reference Rates Committee selected SOFR to replace US dollar Libor, although other new reference rates have also been launched.

Adoption of SOFR products was boosted after a subcommittee of the US Commodity Futures Trading Commission recommended a โ€œSOFR Firstโ€ initiative beginning with interdealer brokers replacing trading of Libor linear swaps with SOFR linear swaps from July 26 2021.

After the financial crisis there were a series of scandals regarding banks manipulating their submissions for setting benchmarks across asset classes, which led to a lack of confidence and threatened participation in the related markets. As a result, regulators have increased their supervision of benchmarks and pushed a move to risk-free reference rates based on transactions, so they are harder to manipulate and more representative of the market.

Sonia contracts

The UK has chosen Sonia as the risk-free rate to replace Libor.

 Ben Jackson, ICE

ICE said in a statement that open interest for Sonia contracts reached a record seven million contracts and an all-time high ADV of 178,000 contracts. Total interest rate ADV was up 13% year-on-year in 2021.

Ben Jackson, president of ICE, said in statement: โ€œThroughout 2021, and particularly during the fourth quarter, we saw consistently high volumes as customers navigated volatile gas and carbon markets, as well as interest rate uncertainty.โ€

Crypto futures and options

CME Group also reported record ADV in Bitcoin contracts of 10,105 in 2021, an increase of 13% year-on-year.

Open interest in bitcoin futures at CME Group increased by more than 50% in October 2021 when two exchange-traded funds tracking the contracts listed on US exchanges.

Tim McCourt, global head of equity index and alternative investment products at CME Group, said in a statement at the time: โ€œThe introduction of funds, like the Valkyrie Bitcoin Strategy ETF, mark an important milestone for crypto derivatives, and will be highly complementary to futures, creating new opportunities for a broad array of institutional and retail investors.โ€

CME expanded its crypto-derivatives suite in December 2021 with the launch of  Micro Ether futures.

However, data provider CryptoCompare highlighted that CMEโ€™s bitcoin futures volumes experienced their biggest monthly decrease in December as the price of bitcoin fell.

CryptoCompare said bitcoin closed December at $46,197, a fall of 18.9% from November, and the largest month-on-month loss since the 49.2% crash in May 2021.

โ€œCME bitcoin futures volumes experienced their biggest monthly decrease – falling 77.4% to $11bn,โ€ added CryptoCompare. โ€œCME ethereal futures volumes on the exchange also fell 38.4% to $14.4bn.โ€

Source: CryptoCompare.

In contrast, CME’s bitcoin options volumes increased 20.6% to 1,464 contracts in December.