Trading volumes on stock and futures exchanges surged in February after fears over the impact of the spreading coronavirus sent important asset classes reeling.
Data from bourses showed that trading flows jumped sharply last week, when the US benchmark S&P 500 stock index tumbled more than 10 per cent from a recent peak to record its fastest correction since the 1930s.
Intercontinental Exchange, which owns the New York Stock Exchange and other platforms, said it handled a daily average of 7.6m futures and options contracts in February — a new monthly record. Deutsche Börse, the German exchange group, said Friday had been the heaviest day for share trading since 2008. Its monthly trading volume rose 60 per cent compared over 2019, to €183bn.
CME Group, the world’s largest futures exchange, said it had its second busiest day on record. “We saw a flight to quality,” said Derek Sammann, global head of commodities and options products at the CME. “People were getting out of equities and into fixed income.”
During the shake-out in markets last week the S&P 500 index notched its biggest one-day fall since 2011. Government bonds rushed higher, driving the yield on the benchmark 10-year US Treasury to a record low below 1.3 per cent as investors sought safety in havens.
“It felt intense . . . our busiest week ever,” said one European trader who declined to be named. “It was record day after record day, and each one seemed to get bigger than the last.”
Friday was the second-busiest trading day on record in the US, according to data from CBOE Global Markets. Turnover hit 19.35bn contracts, just behind the 19.76bn level set in the depths of the financial crisis in October 2008. Nearly $1tn of shares changed hands.
Traders who had been betting on US stocks to keep rising “were caught up with very long US equity futures positions into the correction and were forced to unwind these positions abruptly,” said Nikolaos Panigirtzoglou, an analyst at JPMorgan, in a note to clients.
The rapid shifts resulted in record volumes in exchange-traded funds. State Street’s SPY, the world’s largest ETF that tracks the S&P 500, hit a record for the amount of value traded for the day, which reached $113bn.
Bond ETFs, which trade on stock markets but consist of fixed-income securities, also experienced a rush of activity. Vanguard’s BND bond ETF, the second-largest of its kind, hit a record for value traded on Friday while BlackRock’s iShares AGG, the world’s largest bond ETF, marked its second-biggest day.
Exchanges may benefit from further activity in March. Mr Panigirtzoglou noted that the sharp rise in bond prices and decline in stocks had changed the composition of portfolios of investors that trade across several asset classes, such as pension funds, sovereign wealth funds and balanced mutual funds.
”It’s likely these investors will buy equities and sell fixed-income to rebalance at some point over the coming weeks and months,” he said. However, he added that the timing of these rebalancing efforts was unclear, as many funds are barred by regulation from making quick reshuffles.
Additional reporting by Robin Wigglesworth in Oslo