By Peter Snasdell, Senior Vice President, Devexperts
Futures are rapidly becoming the new darling among market participants owing to their high liquidity, low transaction costs, potential for higher leverage, and ability to hedge against price volatility in underlying markets.
Record-breaking volumes
At the start of 2024, the Futures Industry Association (FIA) reported record-breaking global futures volumes at 137 billion contracts for 2023. This growth represented a 64% increase on the previous year and marks the sixth consecutive record-breaking year in the trading of international listed derivatives.
Furthering this trend, in January of this year it was reported that the top 150 global futures contracts had seen a further 16.7% increase in traded notional value since 2023. The top performers were precious metals and foreign exchange, which saw a 26.5% YoY rate of growth. These were followed closely by interest rate and equity futures, which recorded 20.7% and 17.4% increases, respectively.
Confirming these trends, in February 2025, Intercontinental Exchange (ICE), reported record open interest of over 100 million contracts on its global futures and options markets on February 20. CME Group also reported its largest single day of trading on February 25, with a new record of 67,256,756 contracts traded. Interest rate futures and options topped the bill, with U.S treasury futures and options coming in second.
Trading around the clock
The ongoing surge in the popularity of this instrument hinges on a couple of broader trends that futures appear to cater to quite well. These include a general merging of trading sessions and an increased appetite in round-the-clock trading, which is not available for most of the underlying asset classes that futures contracts track.
While FX was formerly the go-to for those seeking highly liquid 24/5 trading opportunities, the increased interest in futures contracts represents an appetite among speculators to take positions on a broader range of assets outside of traditional trading hours. This also speaks to the global nature of these markets and an increase in international participation.
The influence of crypto futures
The advent of mature crypto markets that can support institutional participation has also been a major part of this story, effectively extending these trading hours to 24/7.
Bitcoin futures have become a firm favorite among institutional traders, many of whom have used crypto as a proxy for expressing views on equities markets over the weekend. This is reflected in the increasing correlation between Bitcoin and the S&P 500 since the pandemic, and in the fact that CME’s Bitcoin futures product (an instrument that is just seven years old) recently debuted in the top 150 of CME futures.
While, historically, many futures markets have experienced issues in gaining popularity and continued interest in their products, modern futures offerings have been successful at fulfilling the various criteria that makes for good futures trading. These include homogeneity, durability, and standardization among the underlying, as well as a high degree of reliable information concerning the assets in question, leading to high demand and unconstrained price discovery.
Increased interest in futures tech
Due to the increased interest in futures trading, there is also added interest in futures trading technologies on both sides of the spectrum, retail and institutional, as well as the HNWI (high-net worth individuals) segment and family offices.
Risk management is a perennial topic of concern, which isn’t just limited to using futures to offset risk in exposure to other instruments, but also as a potential avenue for generating alpha in their own right.
This renewed focus on risk management also reflects a general understanding that many futures markets are new enough to not yet be fully understood by economists in all their complexity, with risks varying in their number and intensity over time and across different asset classes.
In almost all cases, companies are primarily concerned with the ability to implement robust monitoring and control methods in order to be able to detect and avoid potential black swan events in progress. Managing the combinatorial explosion that takes place when calculating complex risk factors across a wide range of instruments in real-time has been a main focus for risk management tools. The failure to do so in the past looms large in institutional memory.
With futures markets gaining increased momentum, market shifts are visibly happening. 24/5 trading is already a reality, and many are waiting for the move to 24/7 trading. This shift will in return provide increased liquidity, but also a need for real-time capabilities such as risk management. As these trends continue to evolve, futures trading will surely provide greater opportunities for institutions offering this instrument to traders.
