EU Exchange-Traded Derivatives in Focus

Shanny Basar

The European Securities and Markets Authority said the market for exchange-traded derivatives has an average daily turnover of €1.3 ($1.6) trillion, based on data which will allow the regulator to track changes due to new regulation.

Esma also said in a report, Trends, Risks, and Vulnerabilities (TRV) Report No. 1, 2018, that the total trading volume of the exchange-traded derivatives market is approximately $200 trillion.

The analysis article provides an overview of the EU exchange-traded derivatives market on the basis of data collected from trading venues in the region for the second half of last year before the implementation of MiFID II, which went live on 3 January 2018. However, the data used is the same as for the MiFID II transitional transparency calculations.

“The forthcoming regulatory framework will have a profound impact on the structure of EU financial markets,” added Esma. “Therefore, a comparison between pre- and post-MiFID II exchange-traded derivative market structures will improve our understanding of structural changes, and this article is laying the foundations for such a comparison.”

MiFID aims to shift trading from the over-the-counter to market to regulated venues and also mandates new transparency and trade reporting requirements across asset classes, and not just for equities.

The analysis also shows high concentration both in terms of products and trading venue location.

Interest rate derivatives represent more than 80%, €166 trillion, of total volumes, with the UK being the largest market followed by Germany. In addition in September last year almost half of the 152 MTFs were registered in the UK with the remainder distributed across the rest of the EU. For swaps, the top 10% of transactions accounts for more than 50% of the traded volume.

Esma continued: “This analysis can serve as a reference point to assess the impact of MiFID II on the EU exchange-traded derivative market structure. This will enable supervisors and regulators to identify significant changes, including benefits and drawbacks of the new regulatory structure, and follow-up with potential actions if necessary.”

In options and futures the top 10% of transactions accounted for more than 80% of the traded volume.

“Continued analysis of the distribution of the different contracts and the potential movements within exchange-tradede and between OTC and exchange-traded markets will be important once MiFID II are fully implemented,” said Esma.

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