Equity Derivatives No Longer Dominate – Axis Direct
AxisDirect-O-Nomics
Sep 03, 2018 | Source: https://www.ft.com

Derivatives Trade No Longer Dominated By Equity Derivatives
Futures and options on equities no longer make up the majority of the global derivatives trade, eclipsed by a combination of record low market volatility and surging demand from Asia for commodity and currency hedges.
Volumes of equity derivatives fell 11 per cent year on year in 2016 to 11.2bn contracts traded, according to annual data released on Thursday by the World Federation of Exchanges.
They now account for just 45 per cent of the total market, although they remain the world’s most actively traded derivative, the WFE added. It was the first time they had been a minority since the WFE, a trade body for the world’s bourses, began compiling records in 2005.
Only derivatives of exchange traded funds, mainly options, registered a rise, of 7 per cent. They account for only 15 per cent of the total equity derivatives volumes.
Equity market volatility around the world closely tracks that in the US. US volatility closely tracks US credit spreads. It does suggest that the fixed income reach for yield has been associated with rising equity prices and especially falling volatility. He said that demand for equity derivatives could increase this year as credit spreads widened, driven by a combination of central banks slowing their asset purchases, a US rates rise and investor concern about political risk in Europe.
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