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January 03, 2024 - CME Group, a global leader in derivatives marketplaces, has announced its December 2023 market statistics, reporting a record average daily volume (ADV) of 24.4 million contracts during the year, an increase of 5% over 2022. The record-breaking year in 2023, with significant achievements across multiple asset classes, included a marked expansion in its foreign exchange (FX) segment.
John Edwards, Global Head of BrokerTec at CME Group, provided an overview of the Repo markets. In the EU Repo sector, BrokerTec saw a robust €267 billion in volumes for December, maintaining liquidity even during the usual end-of-year market slowdown. Notably, the German General Collateral traded at a 45bp premium over the turn.
The U.S. Repo market witnessed a substantial increase in December, with ADV climbing to $313 billion. This was primarily due to an uptick in specials activity across various sectors and unexpected GC (General Collateral) volatility, influenced by ongoing quantitative tightening and increased supply.
BrokerTec's U.S. Treasury segment reported an 8% year-over-year increase in December, with an ADV of $91 billion. The focus on the yield curve intensified, with the RV Curve ADV more than doubling compared to the previous quarter. Furthermore, BrokerTec is set to enhance its RV product suite by introducing Butterfly strategies in January 2024.
Erik Norland, Chief Economist at CME Group, commented on the bond market trends, noting a significant drop in bond yields across all markets as inflation rates decreased in Europe and the U.S. The markets are factoring in potential rate cuts by the Federal Reserve and the European Central Bank in the next couple of years, although the U.S. economy showed strong signs in consumer spending and employment.
Expanding on the FX segment, Paul Houston, Global Head of FX at CME Group, detailed a year of exceptional performance and innovation. The FX futures and options sector achieved an annual ADV of 955,000 contracts. EBS's total spot ADV stood at $52.6 billion in December, while the Open Interest for CME Group FX futures averaged 2.1 million contracts, up 5.6% from the previous year.
CME Group FX Link, a key innovation connecting futures with the OTC FX marketplace, recorded an annual ADV of 22,000 contracts, equivalent to a $2 billion notional value. This represents the continued integration of futures and the broader FX market, offering traders seamless and efficient risk management tools.
Year-over-year comparisons for December showed significant increases in contract volume across various currencies in both futures and options. This included a 15% increase in Australian dollar futures, 25% in Japanese yen, and a remarkable 90% in Chinese yuan futures. In options, the Australian dollar saw a 33% rise, while the Swiss franc and Japanese yen options surged by 597% and 105%, respectively.
The CME Group Volatility Index (CVOL) illustrated a downward trend in FX volatility expectations, indicating a shift from the elevated levels observed in the latter half of 2022. The combined G5 CVOL index averaged 7.6 in December, a decrease of 24% from the previous December and 28% from the full year 2022.
Highlighting record-breaking achievements, CME Group's FX futures and options segment hit all-time highs in both traded volume and open interest in 2023. This included the highest single-day traded volume and the peak total open interest for the futures and options complex. Individual currency pairs also set records, with notable single-day volumes for the euro, Brazilian real, Mexican peso, Canadian dollar, Australian dollar, and Chinese yuan.
CME Group's comprehensive annual report underscores its robust growth and innovation across various asset classes, emphasising the company's commitment to expanding and enhancing its product offerings, particularly in the FX market. The full report and detailed market statistics are available on the CME Group website.
