FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.
The OCC published its December 2023 volume report this week.
The final monthly report of the year is a bit more interesting than the previous 11, because it presents full-year as well as monthly comparisons.
Top-line options numbers were strong in 2023, as average daily volume increased 7.5% to 44.2 million contracts.
But beyond the month-over-month and year-over-year comps, how has the market expanded over a longer time horizon, say a full decade?
A look back at OCC’s December 2013 volume report, published on January 2, 2014, provides some insights.
ADV for equity options increased from 14.8 million contracts in 2013 to 22.5 million contracts in 2023, a 52% gain in 10 years. ADV for index options increased from 1.53 million contracts in 2013 to 3.84 million contracts in 2023, up 151%.
An even bigger difference is noted in the total options ADV, which increased from 16.3 million contracts in 2013 to 44.2 million last year. However, that comp is not apples-to-oranges, as the 2023 ADV includes 17.9 million contracts for ETF options, a line item that didn’t exist in the January 2014 OCC report.
Add it all up and it’s been a healthy past 10 years in the options industry, with organic gains in retail and institutional trading volume, as well as needle-moving new products including ETF options and, more recently, shorter-dated options. The options ecosystem has been robust enough to support 17 U.S. options exchanges, up from 12 in 2013.
Options market participants and observers have noted that the longstanding expansion in the field of options exchanges has been predicated on continued growth, suggesting that 17 exchanges may be suitable for the options market a few years from now, but 17 exchanges would be too many if growth stalls. That will be a dynamic to watch.
