The CME retains the world’s most actively traded futures contract but for how long?

Darren Sinden

The CME Eurodollar contract traded a $127 trillion of notional value on turnover of 509 million contracts in 2020

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The Chicago Mercantile Exchange (CME) has retained the world’s most active exchange-traded contact, despite a slow down in trading volumes seen in the third quarter of 2020 according to new research by COEX Partners.

The company’s 2020 Listed Derivatives Volume Review found that the CME Eurodollar contract traded $127 trillion of notional value on turnover of 509 million contracts, in 2020. Though that represented a volume decline of more than a quarter when compared to 2019 turnover data.

The Eurodollar contract is a US interest rate benchmark which effectively measures the cost of borrowing dollars outside of the USA and is based on three month London Interbank Offered Rates (LIBOR) in the US currency.

The contract retained its global dominance even though LIBOR is likely to be discontinued at some stage in the not too distant future. To be replaced in the US by an alternative benchmark such as the Secured Overnight Financing Rate (SOFR). Though markets are reticent to make the switch it seems.

Indeed there is a significant open interest in Eurodollar contracts dated out to Jun 2025, where 112,000 lots are currently in play.

The CME had some other major successes in 2020 with its Nasdaq micro-emini futures contract seeing volume growth of more than 450% last year. That was enough to take it 82 places higher to 39th in the COEX Partners league table of active contracts.

Growth in volumes wasn’t confined to the developed markets either Brazil’s B3 Exchanges saw its mini Bovespa contract climb to 15th place when ranked by notional value traded. B3’s one day interbank deposit futures contracts traded almost as much volume in March 2020 as it did across the whole of 2019, according to the COEX data.

Meanwhile, B3’s Mini Dollar future is knocking on the door of the world’s top thirty contracts having risen to 31st place in the 2020 rankings.

The COEX report also identified some rather surprising trends in last years derivatives trading, whilst volumes of contracts traded globally rose by 20% above 2019s figures.

The notional value of those contracts fell by 5.0%. Something that the report’s authors attribute to the growth in popularity of futures and options with smaller contract sizes.

The COEX partners report was published in collaboration with business intelligence consultancy Acuiti and tracked the activity in more than 2000 derivative contracts worldwide and it showed growth in both the emerging markets and in contracts that were linked to ESG and sustainability themes.

These are trends that should be of interest to London’s FX and margin trading communities. Brazil clearly has an active derivatives market if the mini Bovespa is the 15th most actively traded futures contract in the world. Then surely there should be an opportunity for CFD brokers to gain traction in the country.

After all index trading accounts for a large portion of the profits at the likes of IG Group and CMC Markets and no doubt at other vendors. The levels of trading in FX and interest rate futures in Brazil should also mean that there is a place for margin FX as well.

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