Weekly Activity Wrap Up
Options and futures volumes continued to come in above their 4Q15TD averages this week in a bid to leg out positive Y/Y comps by the end of the quarter. Options volume averaged 16.7 million contracts per day, raising the 4Q15TD ADV to 16.5 million. Y/Y change remains negative at -4%, but that marks an improvement from last week's -5% comp. Futures volume averaged 19.3 million contracts per day this week, raising the 4Q15TD ADV to 18.1 million, still a -6% Y/Y contraction but an improvement from last week's -7% comparison. Cash equities came in at 7.1 billion shares per day, bringing the 4Q15TD ADV to 7.1 billion, good enough for +2% Y/Y growth. In October of last year, the potential Greek exit from the European Union drove outsized activity, making for difficult comps this quarter in '15. However, with recently rising volumes, Y/Y growth rates are grinding into more positive territory.
Additionally, with a Fed rate hike on the table again near term, the following chart shows that historical Fed adjustments have been positive for CME volumes (mainly in Eurodollar futures and options). In the last rate hiking campaign, which lasted from June 2004 through June 2006, CME Eurodollar ADV experienced a clearly positive upward trend with baseline activity accelerating throughout the program. If the Fed raises rates (even marginally), we expect a similar positive impact on CME fixed income activity.
U.S. Cash Equity Detail
U.S. cash equity trading came in at 7.1 billion shares traded per day this week. That brings the fourth quarter average to 7.1 billion shares traded per day, a +2% Y/Y expansion but -2% Q/Q contraction. The market share battle for volume is mixed. The New York Stock Exchange/ICE is taking a 24% share of fourth-quarter volume, a +2% year-over-year increase, while NASDAQ is taking an 18% share, a -9% year-over-year decline.
U.S. Options Detail
U.S. options activity came in at a 16.7 million ADV this week, bringing the 4Q15TD average to 16.5 million, a -4% Y/Y and -9% Q/Q contraction. The market share battle amongst venues continues to be one of losses at the NYSE/ICE, which has lost -7% of its share year-over-year settling at just 19% of options trading currently. Additionally, CBOE's market share sits at 26%, -16% lower than 4Q14. NASDAQ, on the other hand, has increased its market share by +15% compared to 3Q15, bringing itself only -1% lower than the 24% share it held a year ago. Additionally, BATS' 8% share of 4Q15TD volume is +29% higher than in 4Q14. Finally ISE/Deutsche's 15% share in 4Q15TD remains consistent with 3Q15, which brings it to +8% Y/Y growth.
U.S. Futures Detail
CME Group had its best week all quarter with 14.2 million contracts traded per day, bringing the 4Q15TD average to 13.2 million, a -11% Y/Y and -8% Q/Q contraction. CME open interest, the most important beacon of forward activity, currently tallies 106.6 million CME contracts pending, good for +14% growth over the 93.7 million pending at the end of 4Q14, an expansion from the prior week's +12%.
ICE saw volume of 5.2 million contracts traded per day this week, bringing 4Q15TD ADV to 4.9 million, +12% Y/Y and +15% Q/Q growth. ICE open interest this week tallied 68.2 million contracts, a +15% expansion versus the 59.4 million contracts open at the end of 4Q14, consistent with last week's +15%.
Monthly Historical View
Monthly activity levels give a broader perspective of exchange based trends. As volatility levels, measured by the VIX, MOVE, and FX Vol should rise to normal levels after the drastic compression this cycle, we expect all marketplaces to experience higher activity levels.
Sector Revenue Exposure
The exchange sector has broadly diversified its revenue exposure over 10 years as public entities with varying top line sensitivity to the enclosed trading volume data. The table below highlights how trading volumes will flow through the various operating models at NASDAQ, CME Group, ICE, and Virtu:
Please let us know of any questions,
Jonathan Casteleyn, CFA, CMT
Joshua Steiner, CFA