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Every effort has been made to ensure that the information in this Survey is accurate at the time of printing, but the Secretariat cannot accept responsibility for errors or omissions.

INTRODUCTION
In 2003, global equity derivatives exchanges saw a total of 5.6 bn equity (index and single stock) contracts traded, a rise of 34% on the 2002 figure of 4.2 bn contracts. The notional value of the 5.6 bn contracts was approximately $50 bn. Global cash equity exchanges saw a total turnover of $33.3 trillion 1 , a slight increase (0.9%) on the 2002 figure. This report continues the analysis WFE provides of comparative developments in cash equity and equity derivatives markets and notes that in some regions, especially developing Asia, the growth of derivative markets has not entirely kept pace with evolution of cash markets. The structure of the report is: Regional development of equity derivatives markets 2 Development of cash equity markets Cash equity versus equity derivative volumes – update Cross-sectional analysis of equity derivative notional values and cash equity values. 5. Concluding remarks 1. 2. 3. 4.

1

Otherwise expressed, $33 trillion means $ 33 000 000 million.

As in last year’s report, we note and adjust for the Korea Stock Exchange whose extremely high volumes of low notional value contracts cause distortions in the statistics which mask certain other interesting developments. In fact, this business is worth highlighting and analyzing.

2

Equity Derivatives and Cash Equity Trading – WFE – December 2004

1

1. REGIONAL DEVELOPMENT OF EQUITY DERIVATIVES
MARKETS
In this section, we look at regional patterns of growth and have divided the global figures into regions based on geography and degree of financial market development. The six regional groups are : • • • • • • Asia – developed Asia – developing Europe 3 – developed Europe - developing North America Latin America

Appendix A shows how exchanges are grouped by region, and Appendix B the key exchange data for participants in this study. Table 1 shows the highlights of contract volumes by region for 2003:

Table 1 : Highlights of derivatives volumes 2003 Key contract volume variations Contract volume growth (m) 203 Chicago Mercantile Exchange International Securities Exchange Latin America 138 Bovespa Bolsa de Buenos Aires Developed Europe 13 Eurex Euronext Developing Asia 1,022 Korea Stock Exchange National Stock Exchange of India Taiwan Futures Exchange +967 +30 +24 +99 -79 +86 +50 +69 +93 Contract volume growth (m)

Region North America

Exchange

3

Europe means European time zone, in order to accommodate Tel Aviv and Johannesburg Exchanges.

2

Equity Derivatives and Cash Equity Trading – WFE – December 2004

Figure 1 shows the growth in equity contract volumes over the period on developed markets. The US saw continued growth in equity contract volumes, especially at CME (+32 %) and ISE (+61 %). CBOE showed a small increase and AMEX a slight fall. In contrast, European volumes stagnated, with growth in stock option volumes at Eurex being offset by reductions in stock options at Euronext. Eurex also saw rapid growth in index futures. Developed Asia volumes are much lower than those in other markets (figure1) but continued to rise steadily (figure 3), with robust growth of 20 – 40 % on most developed Asian exchanges.

Fig 1: Total derivatives volumes - developed markets
1 400 1 200

Contracts (million)

1 000 800 600 400 200 0

North America Developed Europe Developed Asia

Among developing markets (figure 2), the Korea Stock Exchange again showed rapid growth (up 50 % to 2.9 billion contracts).

Fig 2: Total derivatives volumes - developing markets
3 500 3 000

1995

1996

1997

1998

1999

2000

2001

2002

2003

Contracts (millions)

2 500 2 000 1 500 1 000 500 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 Developed Asia Developing Asia Latin America Developing Europe

Equity...
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