At the start of 2014, any discussion about trade volumes usually referenced a “return to volatility.” Futures volumes were relatively low, and most asset classes were not moving much on a daily basis. Fast forward a few months and the market was awash in volatility. The Fed first cut back quantitative easing, then anticipated a rate increase; demand in China continued to slow; conflict in the Middle East and Ukraine emerged; and suddenly the world looked different. Higher volatility contributed to higher volumes across CME Group asset classes, which ultimately led to the highest volume year in the company’s 160-year history — an average daily volume of 13.7 million contracts. To put this in U.S. dollar terms, the total value of contracts traded at CME Group in 2014 added up to more than $1 quadrillion. That’s 15 zeros.
Though the momentum began earlier, October was the first month where geopolitical and policy events combined to send volumes to new heights. Philip Stafford highlighted the role of interest rate products during this time in The Financial Times:
The CME’s volume numbers were a reflection of its dominance in products related to movements by the Federal Reserve, such as Treasury and eurodollar futures. The winding down of the Fed’s quantitative easing programme in October, and expectations of rising interest rates, stimulated demand in two-year and five-year notes on the exchange. Overall interest rate open interest — the total number of derivative contracts still running or ‘open’— increased 28 per cent last year at CME.
The high volume came from other sources, and at other times as well. Oil markets were impacted late in the year by slowing global demand and increasing North American supply. In addition to lower gas prices, this triggered an increase in NYMEX Brent crude oil futures of 90 percent on the year. To get a closer look at where and when the trading volume spiked, CME Group has released this infographic outlining the record year: