Equity Options Market in Europe: Exchanges and Electronic Trading Gain Importance

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13 April 2011


Europe is the most developed market for OTC equity options. However, the rising maturity of the European markets and the need to reduce counterparty risk have meant that some OTC business has moved to the exchanges.

In a new report, Equity Options Market in Europe: Exchanges and Electronic Trading Gain Importance, Celent studies the leading global equity options market. In a rapidly changing environment, market participants have to adapt to the higher complexity and use of more advanced technology. There has been a move towards more electronic trading, and we can trace a shift in business moving from the OTC segment to exchanges as the market participants seek to trade standardized products on exchanges.

During the period between December 2008 and June 2010, there were declines in both notional amount outstanding for OTC equity options and exchange-traded equity index options. But the decline was more pronounced for OTC options, from US$3,154 billion to US$2,328 billion, around 26%. In the same period, exchange-traded equity options declined by about 10%, from US$3,034 billion to US$2,236 billion. This shows that there was greater resilience in the exchange-traded market.

“There has been a lot of pressure on European equity options markets of late, due to both the economic environment and the regulatory changes,” says Anshuman Jaswal, Celent Senior Analyst and author of the report. “Rapid evolution means that market participants have to adapt quickly and prepare themselves for higher levels of electronic trading and CCP clearing.”

This report provides an overview of the European market and discuss the relevance of recent developments. This is followed by sections on the OTC and exchange-traded markets. The move towards greater electronic trading is discussed, followed by a section on the challenges being faced by the various market participants.

The 48-page report contains 22 figures and four tables.