Published On: Fri, Feb 11th, 2011

2010 Exchange Statistics For Asia

The World Federation of Exchanges (WFE) just released the 2010 statistics for exchange trading worldwide. This report examines what went on in Asia last year. All dollar values are in USD and all data was taken from the WFE 2010 Statistics report. We included the combined ASX/SGX merged entity for reference only.

Equities
The equity trading business while different from the West where there is fragmentation, best execution and high frequency trading and the East where these concepts are only in their infancy and monopolies hold sway; all comparisons should be taken with a grain of salt. Where possible, the Australian Securities Exchange (ASX) and the Singapore Exchange (SGX) data was aggregated to get a sense of the size of the merged entity.

Baring the market structure differences in mind you can see (Figure 1) Asia exchanges account for 7 out of 10 of the top equity trading destinations in terms of volume in the world. Almost 7 billion shares traded and represent more than 58% of global turnover.

Figure 1
Asia Equity Trading Volume

The reasons that Asia represents such a high percentage of total share trading is that companies issue very large floats at very low prices to allow retail investors access to markets. Asia is still very much a retail market. This statement is also supported by the turnover ratio discussed below where algorithmic trading is more of an institutional pursuit. Some of the highest trading fees in the world can be found in Asia and this is also a deterrent to certain types of institutional flow (i.e. High Frequency Trading).

Figure 2
Asia Equity Trading Notional

The value of shares traded tells another story, however. Five out of the top 10 exchanges are Asian (Figure 2), while impressive, in aggregate, the dollar value of shares traded across Asia are only a little more than the number one ranked NYSE Euronext (17,795,600 million).

2010 market capitalization of Asia’s listed companies was USD19.303 trillion (Figure 3) up 19.5% from last year. Total market cap for the WFE members was USD56.752 trillion up 14.9% from last year. Asia then represented 34% of global market cap and is now larger than Europe, Africa and the Middle East combined.

Figure 3
Asia Market Capitalization 2010

Share turnover was valued at USD18.911 trillion or about 29.97% of total WFE trading up 5.1% from last year. It’s worthwhile noting that the turnover market cap ratio (Total Value of Share Trading / Market Capitalization) in Asia is a little less that 0.98 and in the US and Canada is almost 1.64 reflecting the higher penetration of algorithmic trading in the US. We can also see that the combined market capitalization of the ASX and SGX is still below that of Hong Kong. It’s almost a given that the market capitalization in India will grow rapidly in the coming years pushing that merged ASX SGX further down the list. The ASEAN link which is expected to begin operation some time this year comprises of Singapore, Malaysia, Indonesia, Thailand and The Philippines. The combined market cap of this group is USD1.86 trillion just above the BSE. Given the fundamentals of south east Asia the ASEAN link will be a worthwhile development to watch.

Exchange Traded Funds (ETF)

NYSE Euronext holds almost 72% of the global ETF trading business valued at over USD 4 trillion. That aside, total turnover of ETFs in Asia (Figure 4) was USD274 billion with China, including Hong Kong, accounting for 65.8% of Asia’a ETF trading value. It is interesting to note that Shenzhen with only 3 ETFs did a comparatively large volume with trade sizes averaging over 11,000 USD. ASX/ SGX is listed again for comparative purposes. While the merged entity will have the most ETF listings in Asia with 117 the value of turnover ranks just above Istanbul. For some reason Singapore and Australia total trades data was not given by the WFE.

Figure 4
Asia ETF Notional Value

ETF’s will continue to flourish in China as long as the China Securities Regulatory Commission (CSRC) limits international investing. ETF’s are one of the very few means of diversifying portfolios in China.

Figure 5
Asia ETF Trading Volume 2010

Derivatives

On the derivatives side, stock options (Figure 6) saw the largest volume in Hong Kong with over 60 million traded. This represents over 57% of total stock option volume traded in Asia. However, Hong Kong ranks 7th globally and Asia option trading in aggregate (over 107 million contracts) still ranks 7th place behind NYSE Liffe at 194 million contracts. Total option contracts trade globally were more than 3.6 billion with Asia representing less than 0.5%.

Figure 6
Asia Stock Option Volume 2010

On the flip side (Figure 7), single stock futures (SSF) saw the NSE, Korea, Thailand, Taiwan and Australia ranked in the top 5 in Asia, respectively, in terms of contracts traded. In fact, out of the 786 million SSF traded globally last year Asia represented 28% of the total with the NSE alone accounting for 22% or 78.8% of volume in Asia. It should be noted that the BSE, the NSE’s cross town rival, has no business in either stock options or single stock futures. And neither does the SGX which when merged with the ASX realizes no gain in market share.

Figure 7
Asia Single Stock Future Volume 2010

Stock Index options trading volume (Figure 8 ) continues to be dominated by the KRX with 3.5billion contracts traded representing 83.8% of global volume. With the NSE ranked a distance second at 529 million contracts Asia is clearly the place to find liquidity in this asset class with over 96% of global volume. Of course the tick sizes and notional are much lower than found in the west catering again to retail investor but if you are not in these 2 markets as either broker or vendor you are missing out.

Figure 8
Asia Stock Index Option Volume 2010

Stock Index Futures (Figure 9) continued to be dominated by the CME and Eurex last year but the NSE, OSE and KRX ranked 3, 4 and 6, respectively. The SGX ranked 4th in Asia due to its cross border index trading business but when added to the ASX stock index future (SPI) trading volume still ranks 4th in Asia and 7th globally. Asia accounted for 634million contracts or 33.7% of global trading in index futures.

Figure 9
Asia Stock Index Futures Volume 2010

Securitized Derivatives or covered warrants as they are know are option-like derivatives issued by financial institutions (not companies who use warrants as a financing tool). Eurex lists over 600,000 securitized derivatives in its exchange, the most by far, but ranks fourth (figure 10) in terms of number of trades and 3 (Figure 11) in terms of value traded. KRX with 9063, Hong Kong with 6212 and Taiwan with 5,695 listed derivatives, respectively, dominate global securitized derivatives trading. Korea with almost 61% of global trading volume trades USD354 Billion of notional second only to Hong Kong which trades USD 533 Billion but accounts for just 20% of global trading volume. Unfortunately for Eurex, this type of business is very popular in Asia. Perhaps Eurex should have listed some of their products in Korea or Hong Kong instead of offering KOSPI Index options after hours in Europe.

Figure 10
Asia Securitized Derivatives Trading Volume 2010
Figure 11
Asia Securitized Derivatives Notional 2010

It should be noted that not all exchanges in Asia are represented such as the futures bourses in China or the Tokyo Commodity Exchange. If these volumes were included the data would show a much bigger derivative trading business in Asia at least by volume.

So what does it all mean? We can draw several conclusions from this:

  • The ASX/SGX merger won’t make this exchange group a big player either globally or in Asia.

  • The BSE has a lot of work to do to catch its NSE rival, but with smart order routing and an aggressive management team at the BSE, they should be able to assert themselves in 2011.
  • If you are not in India, Korea or China as a broker or vendor you should think twice.
  • Asians prefer to trade different kinds of derivatives than in the west.
  • Despite its political troubles Thailand’s futures industry is consistently ranked and will continue to grow.
  • Asia’s share of global trading and notional amount should grow as developing nations continue to develop and as exchange competition takes hold.
  • Asia still has a long way to go in terms of algorithmic trading.
  • The sheer size and scale of the financial industry in Asia in the long term will outstrip the rest of the world.

What conclusions can you can draw?

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