HEDGEYE Exchange Tracker | Volatility = Opportunity

Takeaway: With global markets shuddering in the first week of 2016, volume was strong across all categories.

Weekly Activity Wrap Up

The first quarter of 2016 started off with a bang with high activity levels in all three exchange traded categories as global markets shuddered and volatility rose. Cash equity volume came in at 8.4 billion shares traded per day, which is +20% higher than 4Q15 and +22% higher than 1Q15. Futures activity (CME and ICE combined) came in at 21.0 million contracts per day, +17% higher than the previous quarter and +5% higher year-over-year. Options put up an average of 18.4 million contracts per day this week, +15% higher Y/Y and +19% higher Q/Q.

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U.S. Cash Equity Detail

U.S. cash equities trading came in at 8.4 billion shares per day this week, a +22% Y/Y and +20% Q/Q expansion. The market share battle for volume is mixed. The New York Stock Exchange/ICE is taking a 24% share of first-quarter volume, -1% lower than 4Q15 but in line with 1Q15, while NASDAQ is taking a 19% share, a +3% Y/Y expansion but -5% lower than the year-ago quarter. 

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U.S. Options Detail

U.S. options activity came in at an 18.4 million ADV this week, a +19% Y/Y and +15% Q/Q expansion. In the market share battle amongst venues, NYSE/ICE has been trending downward at a moderate pace, but at an 18% share it is +8% higher than the year-ago quarter. Meanwhile, NASDAQ's recent declines bring it -17% lower than 1Q15. CBOE's market share has also been falling and is down -7% Y/Y, but it's starting the quarter on a strong note, +4% higher than 4Q15. BATS and ISE/Deutsche have been taking share from the competing exchanges, with BATS up to a 10% share from 9% a year ago and ISE/Deutsche taking 16%, up from 13% a year ago.

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U.S. Futures Detail

CME Group activity came in at 15.4 million contracts traded per day, a +3% Y/Y and +17% Q/Q expansion. Additionally, open interest at CME currently tallies 95.9 million contracts pending, +2% higher than the 93.7 million pending at the end of 2014.

ICE activity came in at 5.6 million contracts traded per day this week, +12% Y/Y and +17% Q/Q growth. Additionally, open interest at ICE currently tallies 64.2 million contracts pending, +8% higher than the 59.4 million pending at the end of 2014.

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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.

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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:

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Please let us know of any questions,

Jonathan Casteleyn, CFA, CMT 

  

  

 Joshua Steiner, CFA