Asia's growing economic power shapes global derivatives market

The Asia-Pacific region is playing an increasingly important role in the global economy and is expected to contribute around 60 percent of global growth in both 2025 and 2026, said the International Monetary Fund. Asian economies such as China, Japan and India now account for three of the top five countries in the World Bank's global nominal GDP rankings.

The combination of the region's ongoing economic importance, developing financial markets and regulatory environment is creating opportunities in derivatives, as the global market shifts its focus eastward.

Rising derivative demand

Asia-Pacific accounted for the largest share of derivatives trading of any region in October at 62 percent of all futures and options traded globally during the month, with trading volumes in the region increasing by 4.5 percent month-on-month, said the Futures Industry Association. This regional momentum was also reflected at CME Group — global average daily volumes hit their highest level for October on record at 26.3 million contracts, with ADV in Asia-Pacific rising by a significant 29 percent year-on-year to 2 million contracts.

Growth in derivatives trading in the Asia-Pacific region is being driven in part by its rising middle-income group. The number of middle-income consumers in the region has already overtaken the combined total in the United States and Europe, and is projected to continue to grow to hit 3.5 billion by 2030, when it will account for 65 percent of the global total.

As retail investors become both more affluent and sophisticated, moving beyond savings accounts to diversified investment portfolios, many are looking for ways to manage the risks associated with interest rates, currency fluctuations and equity volatility. At the same time, the growing importance that Asia plays in the global economy has led to increased demand from institutions, both locally and internationally, to manage a wider range of risks. This rising demand is expected to continue to drive the development of the futures and options market over the next five to 10 years.

One area that reflects this rising demand is Asian consumers' growing appetite for gold derivatives. Gold has long been favored by Asian investors, not only as a symbol of wealth, but also as a perceived safe-haven asset. Its appeal has grown as a combination of trade tensions, geopolitical conflicts and the outlook for the US economy have contributed to increased global economic uncertainty. Gold has enjoyed a significant bull run, with prices rising by more than 50 percent in the past year and doubling in the past five years, to reach a record high of more than $4,630 per ounce in January. In the second quarter of 2025, a third of CME Group Gold futures by volume were traded during Asian hours, up from around 25 percent historically, while Micro Gold futures volume rose to 42 percent.

Embrace derivatives mkts

The ongoing development of China's derivatives market is a significant highlight in the Asia-Pacific derivatives sector. Over the past 15 years, China's futures and options market has experienced robust growth, in terms of both product availability and investor access, as the market has developed in line with the real economy.

China's regulators are continuing to open up the derivatives market to qualified foreign investors, helping to attract global capital, create robust price discovery mechanisms and support the internationalization of the renminbi. A series of announcements last year saw qualified foreign investors gain access to 23 new commodities contracts in March and a further 16 contracts across three major exchanges in June. In October, participation in on-exchange exchange traded funds options was opened to qualified foreign investors for hedging purposes, bringing the total number of tradeable futures and options products available to qualified foreign investors to more than 100.

Meanwhile, in May, the Shanghai Futures Exchange announced a consultation on a draft of proposals that would enable increased participation from overseas investors, including allowing them to use foreign currency as collateral for yuan-denominated trades and to trade directly with the exchange without having to go through an onshore intermediary. It is also looking at opening its domestic nickel futures contract to foreign investors.

China is also continuing to develop the regulatory framework for its futures market. On Oct 9, the China Securities Regulatory Commission's Administrative Provisions on Program Trading in the Futures Market (Trial) was implemented. The provisions aim to enhance the regulation of program trading, standardize its development and maintain order in futures trading.

Morgan Stanley became the second US investment bank to have futures operations in China after launching such services earlier last year, marking another significant development in the market.

In the coming decade, China's futures market is not only expected to continue to develop, but it could also foster the growth of smaller, rapidly developing economies in the region, as China shares its professional expertise and its infrastructure projects strengthen connectivity with neighboring countries.

Looking ahead

Asia's growing importance on the global economic stage looks set to drive significant growth in its derivatives market. A combination of growing internal demand from an increasingly sophisticated institutional and retail investor base, combined with regulatory reforms to open up the region's markets to foreign capital, could potentially contribute to both higher trading volumes and greater product innovation.

The writer is managing director of Asia-Pacific at CME Group.

The views do not necessarily reflect those of China Daily.