The market recovered strongly in 2023, bouncing back after a challenging 2022. Despite negative market-moving events, such as the regional bank crisis early in the year and a market correction in Sep/Oct due to fears of sustained higher rates, the market rallied strongly. This was due to the significant outperformance by mega cap technology stocks and the prospect by year end of the cessation of rate rises. As a result of the strength in technology and the impact of the moderating rates view, different segments had divergent performance throughout the year, highlighting again how index choice matters. 

Equity options traded a record-high ADV of 1.43M in 2023, an increase of 18% vs. the prior record year in 2022. Traders continued to embrace the liquidity and flexibility of the suite. Nasdaq-100 options experienced outsized growth, driving the growth in the Equity suite and trading a record 65K contracts per day throughout the year (+39% YoY).

Participation in options blocks continues to grow, allowing market participants to execute large trades with greater liquidity and efficiency. Equity options blocks traded a record 119K throughout Q4, marking the fifth consecutive quarter that ADV has surpassed the prior record. Nearly 49M E-mini S&P 500 options blocks have traded, with Q3 2023 ADV at a record 118K contracts (+13% vs. prior Q3 2023 record ADV). E-mini Nasdaq-100 (NQ) options have traded over 148K contracts.

Micro E-mini S&P 500 and Nasdaq-100 options followed suit for a record-breaking 2023, offering precision and access to large-cap companies. 2023 ADV reached 23K, up 68% vs. the prior year record in 2022. Q4 2023 ADV was a record 33K contracts, with four of the top ten trading days occurring during the quarter. 

Starting January 29, pending regulatory review, options on S&P 500 Annual Dividend futures will be available, providing more opportunities to manage U.S. dividend risk. The new options contracts will build upon the robust Dividend futures suite at CME Group, with Q4 ADV over 4.4K contracts and OI at 327K contracts (+15% vs. Q3 2023). Over 1.2M contracts have traded across the S&P 500 Annual and Quarterly Dividend Index futures, Nasdaq-100 Annual Dividend futures, and Russell 2000 Annual Dividend futures. Annual Dividend Index futures on Nasdaq-100 and Russell 2000 have traded over 105K contracts since launch in 2022.

The Q4 2023 Equity Roll (Dec/Mar) implied financing spread to 3-Month SOFR continued to increase to +65bps, up 19 bps compared to Q3 2023. The roll was +41 bps from the Q4 2022 roll of +24 bps, increasing the running 4-quarter moving average to +43 bps (note 3-Month SOFR has replaced 3-Month Libor as the reference).

Equity Index futures:

• Volume: 5.2M ADV
• Open interest: 4.9M contracts per day

Equity Index options on futures:

• Volume: 1.7M ADV (+31% vs. Q3 2023)
• Open interest: 7.0M contracts per day (+21% vs. Q3 2023)

S&P 500 AIR Total Return futures ADV in Q4 2023 reached yet another record with 8.6K contracts and average OI was 413K contracts. OI also reached an all-time high of 454K contracts on December 15, 2023. Clients continue to turn to AIR Total Return futures as a listed alternative to OTC as UMR impacts investors more broadly after Phase 6.

Equity Sector futures ADV in Q4 2023 was 20.2K contracts (+16% vs. Q3), and OI reached a record average of 260K contracts (+3% vs. the prior Q3 2023 record) with a record 370K on December 15, 2023. Overall, 2023 was a record year for the Equity Sector futures with an ADV of 18.5K (+11% vs. 2022) and open interest average 240K (+11% vs. 2022). 

The market has embraced Derived Block functionality on Sector futures, which has facilitated greater intraday liquidity. Over 492K contracts have traded via this functionality since launch across the various sector products with single trades up to $1 billion notional being executed. 

Japanese Equity futures continue to see rising open interest as Q4 2023 combined average open interest was 71K (+17% vs. Q4 2022) across the Nikkei225 Yen and USD-denominated contracts. USD-denominated TOPIX futures are now also available, the first dollar-denominated contract which complements the existing yen-denominated TOPIX futures and provides quanto spreading opportunities.

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