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Rate hike expectations support trading volumes
With the release of March’s turnover on Deutsche Börse’s cash markets also comes the first quarter report of derivatives exchange Eurex.
With further US interest rate hikes on the horizon and a looming end to Quantitative Easing, demand for market instruments to hedge risk has been growing strongly in the first quarter. Hedging needs are driven by open questions – like the number of Federal Reserve rate hikes in 2017 or the European Central Bank’s next monetary policy steps.
At Europe’s largest derivatives exchange Eurex, this market environment helped bring about an overall robust result for the first quarter. Total trading volume amounted to 446.1 million contracts over the first three months of 2017. March saw especially strong volumes, with 190.4 million contracts traded, an increase of 11% compared to March 2016.
For hedging of fixed income exposures in euro-denominated assets particularly, Eurex has been the trading venue of choice.
Listed derivatives are a safe and efficient way to manage interest rate risks. Eurex provides transparent pricing for hedging needs. This supports our trading volumes“, said Eurex CEO Thomas Book.
Eurex has seen particularly strong investor interest in French government debt ahead of the upcoming presidential elections. Market participants rely strongly on Futures and Options on French government bonds (OATs) to hedge these exposures and to take a position on the market. Over the first quarter, 10.9 million Euro-OAT Futures have been traded, representing an increase of 58% compared to the first quarter of of last year.
Overall, the Eurex fixed income segment recorded an increase of 27% in trading volumes compared to the first quarter of 2016. Demand has been particularly strong for EURO STOXX 50 Index Options (75.4 million contracts) and Euro-Bund Futures (55.9 million contracts).
On average, trading volumes in the Eurex equity segment have been resilient as well, although due to significantly lower volatility, these fell short of the exceptionally buoyant results seen in the first quarter of 2016. The first three months of last year were characterised by exceptional volatility in equity markets, sparked by fears of a slowdown in the Chinese economy, as well as generally weaker expectations for corporate profits. On a year-to-year basis, Eurex equity trading volumes recorded a drop of 24% from levels seen in the same period of 2016. Despite this more challenging environment, strong growth was recorded in Eurex’ suite of MSCI index products (+115%) and VSTOXX futures and options (+97%).