By Tommy Wilkes and Helen Reid
LONDON (Reuters) - Stock, bond and currency trading surged to multi-year highs in February, data showed on Tuesday, as a resurgence in volatility provided a long-awaited boost for trading volumes.
Trading across asset classes rose in January as investors rushed for the exits on growing concerns about rising inflation, and worries about the ramifications of the withdrawal of record central bank stimulus kept traders active in February as well.
European stock exchanges grabbed market share last month from alternative trading venues, recording the busiest trading month in a decade. Cash equity volumes rose sharply on the region's biggest exchanges, with Deutsche Boerse (DE:DB1Gn) leading the way with a 45 percent year-on-year increase.
On currency markets, Thomson Reuters (TO:TRI) said average daily forex trading volumes on its platforms rose to a record $463 billion in February, 37 percent higher than a year earlier, and up from January, which was also a record month.
NEX Group (L:NXGN) said spot FX trading rose 34 percent in February from a year earlier to $108.3 billion.
Bond trading platforms, which this year have benefited from the introduction of sweeping new European financial rules designed to encourage transparency, are also reporting big rises in volumes.
TradeWeb, one of the world's biggest bond platforms and majority-owned by Thomson Reuters, said European-based clients had traded 73 percent more European corporate and financial bonds - products affected by the new rules - in February versus a year earlier.
Another bond platform, MarketAxess, saw volumes for the first two months of this year rise to $301 billion, up from $238 billion last year.
Kevin McPherson, global head of sales at MarketAxess, said Mifid II, as the new European rules are known, was "among the drivers of the high level of electronic trading".
Global fixed-income markets were showing "signs of returning to more normal levels of volatility," he said.
(GRAPHIC: Total trading volumes Europe 2008 to 2018 Mar 6 - http://reut.rs/2FkRc1a)
EQUITY JUMP
Turnover across European equity trading venues last month was the highest since May 2008, with around 2.6 trillion euros traded, according to data from Thomson Reuters Market Share Reporter.
ETF trading volumes grew 23 percent in Europe, and derivative volumes grew at Euronext (PA:ENX) and Deutsche Boerse, according to UBS analyst Michael Werner.
Werner attributed part of the jump to exchanges stealing share from so-called dark pools of alternative trading. Limits to dark pool trading, set to be implemented by the European Union's market watchdog on March 12, could deliver a further boost to the exchanges, Werner said.
BOOST FOR BANKS
Banks will be hoping that the bounce in trading volumes can last after several years in which calmer markets have suppressed activity and hurt the profits they wring from trading commissions.
Revenues at the world's 12 biggest investment banks fell to their lowest levels since 2008 last year, a recent survey showed.
Some banks have already reported an improvement in business - Credit Suisse (SIX:CSGN) said in February that revenues in its Global Markets trading division had risen 10 percent in the first six weeks of 2018.
In the bond space, though, much of the rise on electronic trading venues is less to do with changes in volatility and volumes than a switch to electronic trading because of the introduction of MiFID II.
Bond investors have generally executed trades over the phone and many have resisted the move to electronic platforms until recently.
The head of trading at one of Europe's largest investors, Legal & General Investment Management's Ed Wicks, told Reuters that its electronic trading of investment grade corporate and financial fixed income products had risen this year after the rules came into force.