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WFE Survey Shows Derivative Growth

The World Federation of Exchanges has reported the highest levels of trading in derivatives contracts on global regulated exchanges in nearly a decade.

The trade association says that in 2010 over 22.4 billion derivatives contracts – made up of 11.2 billion futures and 11.1 billion options – traded on exchanges worldwide, up from 17.8 billion contracts in 2009. This figure represents growth of over 25%, the highest recorded since 2003.

The number of futures and options traded rose by 35% and 16% respectively, according to the WFE, which annually conducts the survey for the International Options Markets Association.

Ronald Arculli, chairman of WFE and chairman of Hong Kong Exchanges and Clearing, says, “The strong volume in exchange-traded derivatives in 2010 indicate that reforms in regulation of over-the-counter derivatives markets are causing participants to shift some of their risk transfer activities to exchange-traded derivatives.”

Currency derivatives remained the smallest segment of organised markets with 2.3 billion contracts traded, according to the preliminary WFE derivatives report.

“Nevertheless, driven by the Indian exchanges that accounted for 71% of the volumes traded in 2010, [currency derivatives] have experienced triple-digit growth rates in 2010 at 144%. When the Indian exchanges are excluded from statistics, the growth rate of traded volumes in 2010 was still a very strong 36%,” the WFE says.

Interest rate derivatives trading grew by 29%, surpassing pre-2008 financial crisis levels. With a significant volume drop of 23% in 2009, this segment had been the most heavily hit by the recent financial crisis.

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