There are signs that volume in exchange-traded derivatives is growing faster than over-the-counter products. Frances Maguire examines the drivers behind this trend and the impact of clearing on trading in capital markets.Standardised exchange-traded contracts have always represented the tip of the iceberg, dwarfed by the volumes carried out by banks over the counter in the form of complex, structured, customised instruments. While this is still the case and both continue to grow, a study – published by Morgan Stanley and Mercer Oliver Wyman in June 2003 – found that for the preceding 18 months, exchange-traded derivatives had grown faster than off-exchange products for the first time in a decade.
Firms operating across Europe are prevented from achieving the same economies of scale as those in the US because of the multiple jurisdictions in which they have to operate. However, the market is gradually moving towards “domicile indifference” through pooling funds.Frances Maguire reports.