What happened in global financial markets – Q1 2010 versus Q1 2009?

What are the main trends in the evolution of traded volumes in both equity and derivatives over the past year? This article provides the answers.

When comparing the first quarter of 2010 to that of 2009, one can see that capital markets show signs of recovery. This evolution was driven by a growing trend in domestic market capitalization, volume and turnover of trades in equity and derivative markets, and, up to the end of Q1 2010, lower volatility. In the EMEA and Asia-Pacific regions market activity rose above 2009 levels although a flat trend was apparent in the US. Volumes increased steadily on the European MTF Markets and on emerging markets like Brazil and Istanbul.

1 – Volatility

• 6 months VIX* S&P 500

*VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. A high value corresponds to a more volatile market and therefore more costly options, which can be sold to defray risk from this volatility. Often referred to as “the fear index”, it represents a measure of the market’s expectation of volatility over the next 30 days.

• 3 years

source: MarketMap

Market volatility has declined precipitously since peaking in November 2008. At the end of first quarter 2010, the VIX was around the 18% level and hovering near the 52-week low, reflecting optimism among market participants. Those levels have not been seen since early 2008 and are not far from the lows near 10 seen in early 2007 before the collapse of the subprime market.

2 – Value of Shares Traded

In Q1 2010, overall cash equities turnover increased by 10 % compared to Q1 2009. The Asia-Pacific and the EMEA zones improved markedly by 32% and 31% respectively compared to the same period in 2009, whilst the Americas have dropped slightly by1%.

Compared to Q4 2009, Asiatic turnover of shares traded decreased by 11% whilst an improvement of 4% and 6% occurred in the Americas and EMEA.

Below is a comparison showing between Q1 2010 and Q1 2009 at the top 5 growing markets by zone:

3 – European MTF Markets

2009 was a good year for the European MTF Markets, and most of them are continuing in steady growth in 2010. Comparing Q1 2010 to Q1 2009 the growth has been huge: 467% for Bats, 148% for Chi-X, and 982% for Neuro but Turquoise’s turnover has fallen by 16%.

4 – Volume of equity trades

Between Q1 2009 and Q1 2010 the overall volume of equity trades declined by 16%, affected by continuous deterioration in the Americas (-38%), whilst the Asia-Pacific and EMEA zones are recovering, respectively up 8% and 11% compared to a year ago.

5 – Total value of bonds trading by region

In Q1 2010, EMEA represented 92% of overall bond turnover, the Americas 6% and Asia-Pacific 2%. Compared to Q1 2009, bond turnover increased by 24% in the Americas and declined by 22% in Asia and by 16% in EMEA.

6 – EMEA Bonds vs. Shares Turnover

In Q1 2009 EMEA Fixed income turnover from bonds was 32% higher than the value of shares traded but, by Q1 2010, the difference between the two had been reduced to only 9%.

7 – Domestic Market Capitalization

In Q1 2010, domestic market capitalization (DMC) increased markedly, by 55%, compared with Q1 2009. Asia-Pacific grew the most (63%), followed by EMEA (55%) and then the Americas (50%). The top-five growing exchanges by zone in DMC between Q1 2009 and Q1 2010 were as follows:

8 – Derivatives Volume of contracts

source: FOI

The most growth was in Currency contracts, up 163% in Q1 2010 compared with Q1 2009; volume in interest rate and agriculture contracts also increased markedly, by 41% and 48% respectively.

source: FOI

During the first quarter 2010, contract volumes on the four major derivatives exchanges increased by 18% compared to Q1 2009. Liffe saw the most growth (29%), then CME (27%) and ICE (25%), however, volume on Eurex was flat (-0.26%).

source: FOI

Volume of contracts traded in Q1 2010 was higher than in Q1 2009 for all regions except Africa. Overall volume of derivatives contracts increased by 19%; most growth was in the Asia-Pacific zone (38%), followed by South America (25%), the US (10%) and Europe (6%).