This first quarter of 2007 has seen much higher levels of volatility than during the entire second half of last year.  And of course, with higher volatility usually comes higher volume, which is making for some record quarters at the public exchanges.  Here’s a quick recap of recent volume figures:

The Intercontinental Exchange (ICE), which is still integrating its NYBOT purchase from last year, saw average daily volumes for March up 23% at 4.4 million shares.  Average volumes at the company’s U.K. futures market rose over 76% YoY, driven largely by gains in oil futures trading. 

Meanwhile, average daily commissions in ICE’s OTC trading nearly doubled (up 98%) from March ’06.

The Chicago Boys also performed well last month – The Chicago Mercantile Exchange (CME) reported record average volumes of 7.7 million shares per day, up 45% YoY.  CME’s electronic Globex platform reported volume growth of 59% in March.

Meanwhile, over at the dually-targeted CBOT (Both CME and ICE are looking to acquire the exchange), March volumes came in at 4 million/day, up 30% from last year.  Gains here were largely driven by heavy increases in agricultural future like corn, where volume is up over 60% in the past year. 

Nymex (NMX) reported March volumes up 44% to 1.37 million per day, while total volumes for the 1st quarter were up 40% YoY.  Within the strong overall figure, however, we see evidence of the mass exodus in floor trading, as NYMEX floor volumes fell from 540k to 329k per day, while electronic volumes rose nearly 600% to 595k/day. 

Nymex also says that it will be adding crude oil options to its electronic platform starting on April 16; floor-traded options on crude prices will continue to trade at the exchange. 

The increasing volume story seems to be legitimate, and not just reserved to heightened uncertainty around the stock market.  Gains are being had across the board in commodities, oil futures, and OTC credit markets.  Derivatives are becoming democratized, being used by more and more investors in both “old-school” hedging models and as speculative investments.  We will keep you up to date as earnings announcements come together for the group, as 1^st qtr releases should tell us a lot about the breadth of growth, M&A prospects, and the ongoing revenue implications of Reg NMS.

Ryan Barnes

April 6, 2007

Ryan Barnes can be reached at [email protected]; he does not own securities in the companies he covers.

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