Global exchange-traded derivatives market expected to grow

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10 October 2011
Anshuman Jaswal
The performance of the exchange-traded derivatives market has been one of the few silver linings of the post-financial crisis period. There are two discernible trends in this market. The first is the clear lead that the developed markets, especially the US, have in terms of innovation. The introduction and success of products such as exchange-traded fund options and volatility index derivatives is a testament to this. The second trend is the sharp growth in volumes of established products such as stock index derivatives, currency derivatives and commodity derivatives once these are introduced in the emerging markets. Korea Exchange is the runaway leader for stock index options, currency futures boomed once they were introduced in India two years ago and the strong underlying demand for commodities in China has meant that it has three of the top commodity derivatives exchanges in the world. However, it would be useful to mention the difficulty that the Asian exchanges have had in terms of introduction of interest rate derivatives. The illiquid nature of the underlying bond market has meant that these derivatives have not been successful outside of Japan and Australia. An important recent development for the exchange-traded market is the introduction of legislation that is going to make central clearing for OTC derivatives compulsory in markets such as the US and Europe. This is going to increase the complexity of trading such products and will drive some volumes towards exchanges where the complexity and cost of trading standardized derivatives is expected to be lower. According to our analysis in an upcoming report, the derivative segment that will benefit from these regulatory changes is currency derivatives, followed by interest rate and equity derivatives. It is important to note that it would be the leading exchanges in the US and Europe that would see the benefit of this migration of OTC derivatives, as most of the OTC trading occurs in these markets.


  • It is important to note that in Europe MTFs are becoming quite vocal about the lack of competition in the ETDs space. An many of them are requesting the leading exchanges, notably Eurex to allow them to offer its instruments on a license basis to competing execution platform. Will this happen ? Very unlikely, unless the regulators jumps in.

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Geographic Focus
Asia-Pacific, EMEA, LATAM, North America