According to new TABB Group research, “US Futures Market: State of the Industry 2013,” written by Matt Simon, senior analyst, investment activity improved slightly in the fourth quarter but similar to the rest of the year, futures volumes remained steady throughout 2012.
Eleven out of the twelve months surpassed 200 million contracts traded while there was not a single month when volumes topped the 300 million mark, as seen in March and August of 2011. Yet, only the summer slowdown during July saw volumes dipping below 200 million contracts.
- Looking forward, TABB Group expects looming OTC market regulations to boost interest rate futures volumes in the first half of 2013 and beyond.
- To date, interest rate swap futures have been averaging close to 2,000 contracts per day.
- At that pace, it will hardly make a dent in TABB’s projected 12% growth rate for IR futures.
- Rather, IR volumes will increase significantly as interest rate volatility returns and OTC swap volume migrates to like products in the US futures markets.
Simon also believes greater activity in the underlying cash equity markets will carry over to the equity futures markets. In TABB Group’s January 2013 report, “US Equities Market: 2013 State of the Industry”, Adam Sussman, director of research, forecast that cash equity volumes would increase by 6% in 2013. Similarly, equity futures volumes will continue to rise as the ETF market grows.
As demand increases in futures markets, both brokers and exchanges are realigning business models. For exchanges, says Simon, they are spending additional time educating their customers about product offerings and launching new products that make sense under the changing regime. Meanwhile, futures commission merchants (FCMs), he adds, are continuing to focus efforts on meeting regulatory mandates and helping clients transition their activity from an over-the-counter marketplace to an exchange-listed trading environment.
The long-term outcome will largely depend on how firms match execution and clearing projects with business opportunities. Specifically, initiatives around “futurizing” OTC markets will have the greatest impact on how futures brokers and exchanges collect new revenue.
“It is our belief,” Simon says, “that competition amongst FCMs will become top-heavy. There will be a strong focus by customers on core competencies and measuring results. Amongst the differentiators will be the ability to provide services that support clients across both futures and other asset classes.
The report includes the following exhibits:
- Millions of Contracts Traded on US Futures Exchanges, 2001 – 2012
- US Futures Contract Volume, in Millions
- US Futures Contract Volume, in Millions, including 2013 Projections
- Recent Exchange Announcements of Note
- CME Group Deliverable IR Swap Futures Volume, Inception – 2/06/13
- CME Group Deliverable IR Swap Futures OI, Inception – 2/06/13
- ICE Futures U.S. Gas Contracts, Jan 2011 – Dec 2012
- ICE Futures U.S. Power Contracts, Jan 2011 – Dec 2012
- CME Group vs. NewCo. U.S. Combined Futures Volumes, 2012
- U.S. Futures Exchanges Market Share, 2012
- Tier 3 Exchange Volume in Number of Contracts (by Asset Type), 2012
- Number of FCMs & Customer Asset Totals, Dec 2007 – Dec 2013e
- Percentage of Account Balances of Top-Tier FCMs, July 2002 – July 2013e
- US Futures Business Revenue Estimates for FCMs, 2008 – 2013e
- How are You Choosing Your FCM/Clearing Broker?
- Managed Futures Performance & CTA Industry AUM, Dec 2005 – Sep 2012
- Exchange Traded US Futures Notional Turnover, 2007 – 2013e
- Ratio of Equity ADV to Equity Futures ADV, Jan 2008 – Dec 2012)
- VIX-CBOE S&P 500 Volatility Index (VIX) Futures versus Options Equity and Index Volume, Dec 2008 – Sept 2012
- Options on Futures Annual Volume, 2008 – 2013e
