COMMODITY EXCHANGES
This increase in volumes was partly – but not only
– explained by mainland Chinese exchanges that experienced a 34% increase and which accounted for 41% of global volumes in 2012, according to WFE. As a whole – and for the first time since 2004 – the number of exchange derivatives traded worldwide decreased by 15% in 2012 to 21 billion contracts (11 bn futures and 10 bn options) – an overall decrease from the 25 bn traded in 2011. Looking at the major commodity exchanges,
the picture was mixed. On the whole, the industry continued to drive business as commodity price volatility increased amid an anxious and fragile economic recovery, itself reflecting the growing need to manage currency and commodity price risk in a volatile macro environment. The London Metal Exchange, the world’s biggest
marketplace for industrial metals, had its busiest ever year in 2012 with volumes up 10%. There was a similar story at IntercontinentalExchange, with ICE total contract volumes in 2012 reaching 847 million, up 10% from 2011. Full-year 2012 volumes at CME Group averaged 11.4 million contracts per day, down 15% from 2011 levels, although CME Group energy, metals and agricultural contract volumes fared better. For the full year 2012, average daily volumes for commodities product (European derivatives) were 10.6% higher at NYSE Euronext (89,000 contracts),
Back to the Futures
with volumes traded across NYSE Liffe’s commodity derivatives having grown an average of 15% per annum since 2006. In Asian markets, the picture was much healthier. Singapore
Exchange (SGX) derivatives and commodities volumes reached new highs in 2012. The volume of agri-commodity futures grew 56% in 2012 (255,815 contracts) and the volume of commodity swaps cleared in 2012 grew 74% (332,465 contracts). Newer exchanges like the Dubai Gold and Commodities
Exchange (DGCX) registered substantial growth 2012 of 137% reaching 9,601,553 contracts, the upsurge in 2012 volumes led by the substantial growth of Indian Rupee and gold futures. At the Singapore Mercantile Exchange (SMX) which trades
black pepper, gold, copper and iron ore, over 4 million contracts have traded since its launch (August 2010) to end 2012 with cumulative turnover of over US$134 billion since SMX went live. Singapore-based Cleartrade Exchange (CLTX; an electronic
global marketplace for commodity futures and OTC cleared derivatives) is now processing over 300,000 lots per quarter, a phenomenal achievement for a relatively new exchange. Average daily volumes in the settlement window on the Dubai
Policymakers want greater transparency and central
counterparty clearing. Swaps were at the centre of the latest financial crisis, so under new global rules, swaps will need to be traded on exchange like platforms, with central clearing houses standing in between buyers and sellers to reduce risk. Two leading commodity exchange powerhouses – CME Group and IntercontinentalExchange – have been scrambling to turn the new regulations to their advantage in the trading and clearing of energy swaps. Both are now creating new advantage by recasting many, if not most, cleared energy swaps as futures – the “futurization of swaps” – thereby making them exempt from new CFTC rules or avoiding any increased regulatory burden. And the stakes are high. OTC energy clearing, for example, generates a large proportion of exchange revenues.
For the energy industry the benefits of switching to futures
is huge. ICE has already converted all existing OTC cleared energy swaps and option products into economically- equivalent futures and option products, arguing that already tested futures market regulations give market participants more certainty than the untested regulation in swaps markets.
Similarly, CME have listed all actively traded contracts on CME Clearport for execution on the CME Globex central limit order book. Since last October, CME customers have consistently traded approximately 80% as futures, compared to approximately 15% beforehand.
10 March 2013
Mercantile Exchange (DME) grew by 40% last year reaching 1,407. DME Oman remains the largest physically delivered crude oil futures contract in the world, with the exchange trading the equivalent of more than 1bn barrels of oil for the first time in one year during 2012. The CME Group and Oman Investment Fund increased their investments in DME to 50% and 29% respectively last February, endorsing its standing. In 2012, Hong Kong Mercantile Exchange (HKMEx) successfully completed its first full calendar year of trading with over 1.4 million contracts changed hands, representing turnover of close to US$72 billion and an average of 5,841 contracts traded per day. Membership also continued its rapid growth – increasing by 50% from 22 to 33. Activity at the four mainland commodity exchanges in China – Dalian Commodity Exchange (DCE), Shanghai Futures Exchange (SFE), Zhengzhou Commodity Exchange (ZCE) and China Financial Futures Exchange (CFFEX) – continued to shine. Chinese infrastructure investments are driving volumes, according to the FOW Intelligence. Steel Rebar futures rose 121% Y-0-Y on the SFE while the DCE’s soy meal futures saw volumes increase five- fold. These Chinese exchanges continue to broaden their horizons and collaborations. Brazil’s BM&F Bovespa also surpassed all its previous
year’s volumes in 2012, although the total number of commodity futures and options contracts traded was down slightly from 2011 levels at 2,258,122. A total of 804,508 corn futures and options contracts were traded in 2012, surpassing the previous record of 558,311 in 2011. Live cattle, Arabica coffee, ethanol, and soybean contracts all suffered small falls in activity.
Exchange Consolidation The commodity exchange community continued its strong
development in 2012, particularly in Asia. New exchanges have been added (like the Ethiopia Commodity Exchange (ECX), Africa’s first dedicated commodity exchange and
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