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Takeaway: CME's 4Q15 Y/Y change remains negative given the tough 4Q14 comp, but activity expanded Y/Y in Nov and is continuing to expand in Dec.

Weekly Activity Wrap Up

Trading activity for equities and options was light in the 5-day period ending December 3rd, which included the Friday after Thanksgiving. Cash equity volume came in at 6.6 billion shares traded per day, bringing the 4Q15TD ADV down to 7.0 billion, which is flat versus 4Q14 and -4% lower than 3Q15. Options put up an average of 13.2 million contracts per day this week, blending the quarter-to-date daily average to 16.3 million, -6% lower Y/Y and -10% lower Q/Q.

HEDGEYE Exchange Tracker | Acceleration at CME - XMon1

Total futures activity (both on CME and ICE) came in at 18.7 million contracts per day in the most recent 5 days, blending 4Q15TD ADV to 18.3 million, a -5% Y/Y change and -2% Q/Q change. Although quarterly comps are still tough against last year with the threat of the Grexit in 4Q14, monthly activity is starting to accelerate. Activity levels on CME rose to +6% in November Y/Y and December is comping currently at +15% higher. In concert with rising activity, open interest levels are up +10% from year-end 2014 which will drag trading volume to higher levels into 2016. We estimate that CME should also announce its variable dividend of up to $3 per share over the next 2 weeks continuing to make shares attractive in the short run as well.

HEDGEYE Exchange Tracker | Acceleration at CME - XMon16

U.S. Cash Equity Detail

U.S. cash equity trading came in at 6.6 billion shares traded per day this week. That brings the fourth quarter average to 7.0 billion shares traded per day, a 0% Y/Y change and -4% 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 -10% year-over-year decline.

HEDGEYE Exchange Tracker | Acceleration at CME - XMon2

HEDGEYE Exchange Tracker | Acceleration at CME - XMon3

U.S. Options Detail

U.S. options activity came in at a 13.2 million ADV this week, bringing the 4Q15TD average to 16.3 million, a -6% Y/Y and -10% 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 19% of options trading currently. Additionally, CBOE's market share sits at 25%, -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 +34% higher than in 4Q14. Finally ISE/Deutsche's 15% share in 4Q15TD remains consistent with 3Q15, which brings it to +7% Y/Y growth.

HEDGEYE Exchange Tracker | Acceleration at CME - XMon4

HEDGEYE Exchange Tracker | Acceleration at CME - XMon5

U.S. Futures Detail

CME Group activity came in at 13.2 million contracts traded per day, bringing the 4Q15TD average to 13.4 million, a -10% Y/Y and -7% Q/Q contraction. CME open interest, the most important beacon of forward activity, currently tallies 103.4 million CME contracts pending, good for +10% growth over the 93.7 million pending at the end of 4Q14, an improvement from last week's +9%.

ICE saw volume of 5.5 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 69.4 million contracts, a +17% expansion versus the 59.4 million contracts open at the end of 4Q14, an improvement from last week's +12%.

HEDGEYE Exchange Tracker | Acceleration at CME - XMon6

HEDGEYE Exchange Tracker | Acceleration at CME - XMon8

HEDGEYE Exchange Tracker | Acceleration at CME - XMon7

HEDGEYE Exchange Tracker | Acceleration at CME - XMon9 

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.

HEDGEYE Exchange Tracker | Acceleration at CME - XMon10

HEDGEYE Exchange Tracker | Acceleration at CME - XMon11

HEDGEYE Exchange Tracker | Acceleration at CME - XMon12

HEDGEYE Exchange Tracker | Acceleration at CME - XMon13

HEDGEYE Exchange Tracker | Acceleration at CME - XMon14

HEDGEYE Exchange Tracker | Acceleration at CME - XMon15

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:

HEDGEYE Exchange Tracker | Acceleration at CME - XMon19 3

Please let us know of any questions,

Jonathan Casteleyn, CFA, CMT 

  

  

 Joshua Steiner, CFA