Fixed Income market briefing December 2023

Where to begin with November? First, the month went by in a blur; the pace and teamwork across the business and with external stakeholders was uplifting, energizing, and brought goosebumps. Second, we set records and achieved firsts, all thanks to the support from our members, liquidity providers, partners, and, ultimately, end clients. The Fixed Income & Currencies business traded over 77m contracts. 

Our STIR initiative began November 1st and the hard work started. We traded with over 2m contracts in November, c.1.5m Euribor futures, c.700k ESTR  and 100k SARON contracts. To put this into perspective, we had just broken the 250k mark in ESTR at the end of summer. Between summer and the start, we reached 1m traded contracts; hence, November marked a big increase. As liquidity progressed and markets expressed expected rate cuts for 2024 and beyond, ESTR and Euribor futures set multiple new single-day volume records. ESTR futures saw 93k futures trading on Nov 24, and Euribor futures topped out at 338k contracts on Nov 30, both showing outstanding volume developments thanks to the start of the partnership program. Open interest (OI) continued to grow, and we saw it double in the first week of December. Yes, we still have work to do to surpass others, and the team is working hard towards that. As I write this, we will be LIVE with Inter-product spreads, which should help support our volume and OI developments. Judging a team on its first ten minutes in the game would not be appropriate. There is still a long way to go on this journey. What I do know is that we do not take your support for granted. We will continue to work with each stakeholder to give the initiative the best chance of success. The success will be a collective effort; no one part is more important than the other.

The month was particularly busy in terms of client engagement, with the month closing at FIA Asia, held in Singapore. It was a great opportunity to engage with our clients, liquidity providers and members in the region. It was an opportunity to share ideas and insights, review the year and discuss our 2024 roadmap. Key takeaways:

1. We continue to build out our franchise in the region
2. The buzz around key initiatives, STIR, FX and Credit, is well-supported
3. There are concrete ways in which we can grow within the region to support our clients better.

The core business had the strongest November on record, with futures volumes c.62% higher vs November 2022 and options c.17.2% higher. Admittedly, it wasn’t all a sea of green; there were areas where volumes underperformed relative to 2022. All the core futures saw double-digit and one triple-digit growth (Buxl), except for Bonos, which saw volumes decline by 11%. The long end of the curve saw volumes increase 133%. This was largely driven by a grab for long end yields. The Italian segment continued its strong 2023, with volumes higher across the curve. The French segment had a solid November, with volumes 43% higher than last year.

The options segment offered a mixed set of results. Weekly bund options continued to outperform relative to the rest of the segment, with volumes 180% higher compared to November 2022. Regular Bund and Schatz options volumes saw double-digit growth compared to last year's period. Bobl and Buxl were the exceptions, with 25% and 31% lower volumes.

Credit continues to be an area where we see increased client interest and dialogue. The team focuses on working with key third-party systems to ensure readiness, which will help us accelerate the volume development in 2024. We will launch new contracts early in Q1 to support our ambitions to be the Global venue for credit derivatives. This will include GBP, Emerging Markets and US listings. We are genuinely excited by this segment and will continue to work tirelessly with our clients, partners and liquidity providers to develop this market. Like STIR, we are at the beginning of this journey and take comfort in being the first to establish a liquid pool of contracts. We will remain humble in our approach, adapting it where necessary to help accelerate liquidity development.

FX volumes were 20% higher compared to November 2022, which gives us comfort that we continue to chip away and take steps towards our goal of creating a viable liquidity pool. Client engagement accelerated throughout the month, and we will have six new clearers onboarded by year-end, barring any last-minute hiccups. The team has really worked together to get to this position, with 2024 as the year of execution. The pressure is on, as is our focus. In 2024, new initiatives will be executed early in the year that should help underpin and support this.

Looking to 2024, there is much to be excited about. The pipeline of new products is deep and spans STIRs (ESTR options, TED spreads), rates, credit (EM, GBP, USD) and FX. This, together with building on the initiatives launched this year, makes for a very eventful 2024. 

Thank you to all our colleagues, members, clients, liquidity providers and partners who have contributed to this year’s success. Our success is your success, and the team is sincerely grateful for your continued support. It is not, and will never be, taken for granted. We are committed to achieving the best possible outcome in all we have set out to do and will enter 2024 with renewed energy.

As we enter the final stages of 2023, we wish you and your loved ones a healthy and joyous festive period. Thank you from the entire FIC Product Development Team!!