The two Reports offer a first comprehensive view of the EU securities and derivatives markets after Brexit, i.e. without reporting data from UK financial participants. In both, the impact of the withdrawal is significant: the size of derivatives markets and the volume of securities trading are around two-thirds lower without the UK. Our Reports provide, in dedicated sections, extensive comparative evidence to document the effects of Brexit on market statistics, juxtaposing post-Brexit EEA30 and pre-Brexit EEA31 data, while considering the UK’s continued involvement. in the EU Single Market to the end. of 2020.
These comparisons aside, the two documents report exclusively on post-Brexit EEA30* data.
EU derivatives central clearing increased in 2020 amid overall market decline
Derivatives markets in the EEA30 saw a 4% decline in 2020, while market structures remained largely unchanged. Key figures from the Report include:
- The EEA30 derivatives market had a total size of EUR 254 billion gross notional amount outstanding at the end of 2020, a decrease of 4% compared to the EEA30 market in 2019.
- The market decline was mainly driven by currency and equity derivatives. Interest rate derivatives grew in the first quarter of the year, but then fell back and finished flat for the year. Derivatives on interest rates, currencies and shares represent 79%, 13% and 4% of the total, respectively.
- Central clearing activity saw an increase for both interest rate and credit derivatives. The total share of cleared outstanding interest rate derivatives grew to 71% from 68% in 2020, while for credit it increased to 41% from 38%.
- OTC trading still accounts for the bulk of trading, with the share actually growing slightly from 91% to 92%. However, the total share executed on trading venues grew strongly, from 19% to 23%, driven by strong increases in OTC derivatives executed on trading venues in interest rate, credit and currency derivatives.
- Exposures remain highly concentrated with relatively few counterparties, notably credit institutions and investment firms. CCPs remain important but are less visible in the statistics with the removal of UK CCP reporting.
- The UK remains the dominant market for transactions within the EEA, as well as with third countries. Exposures within the EEA30 represent around a quarter of the derivatives market and have increased slightly since 2019.
Equities: Rising New Admissions and a Strong Insider Bias for European Equities and Bonds
EEA30 equity markets show a market rise in new admissions in 2020 and continued structural insider bias, especially in equity trading. Key figures from the Report include:
- EEA30 stock market turnover volumes amounted to EUR 8.8 trillion for stocks and EUR 17.9 trillion for bonds, and are down two-thirds from 2019 when comparing EEA30 and EEA31. The distribution of instruments by type has remained practically unchanged.
- In equity markets, volumes peaked in March (EUR 1.1 trillion) due to the COVID-19 pandemic, with the majority of volumes being in equities (86%), although the share of ETF in equity volumes (12%) continued to increase in 2020.
- Trading patterns have remained similar to previous years, with stock trading mainly on the stock exchange, with regulated markets accounting for 70% of volumes; and bond trading largely off-exchange in 2020 (66%), with large trades.
- For EEA30 instruments, a strong insider trading bias is observed, as 65% of EEA30 share volumes were produced at a trading venue or systematic internaliser in the same jurisdiction as the issuer, and 49% for EEA bonds30, even if most of these instruments were available for cross-border trading.
In addition, the equity trading obligation for equity instruments has had a strong impact in 2021. This led to a change in the equity trading landscape with an increase in trading of EEA30 shares in EEA30 venues, to be featured in the next report.
The objective of this data analysis is to contribute to ESMA’s risk assessment, facilitate the supervision of the entity by supervisory authorities, both national and European, and promote supervisory convergence. ESMA will continue to report its analysis annually.
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*Statistics reported for EU27/EEA30 in the Reports cannot be directly compared to statistics in our publications for previous years.