The derivatives industry has found itself at the centre of the debate about regulatory reform, an issue that remains at the top of the international agenda. It can have no complaints about this: CDS played a massive part in whipping up the storm that engulfed Lehman Brothers, and would have claimed other high-profile and economically devastating casualties in AIG, Citi and others, but for the costly government interventions. While many argue derivatives did not cause the crisis, it is hard to ar

The European Union’s Emissions Trading Scheme (EU ETS) has established itself as the model for cap-and-trade schemes set to be introduced around the world. Australia, Japan and the US are set to be the next countries to adopt similar schemes. But these plans – and the existing European market – are being held back by uncertainty. Some market participants are looking hopefully towards the UN Climate Change Conference in Copenhagen this December. But for many, optimism is in short supply. More tha

Uncertainty looms large in the CDS market. Not all of this uncertainty is regulatory: Richard Metcalfe, global head of policy at the International Swaps and Derivatives Association, said regulators should pay as much attention to the quality, quantity and timeliness of OTC derivatives market data they receive as they do to OTC reform, to ensure clarity over where the industry really stands. Yet the headline-grabbing debates have centred on regulation. The industry is trying to push past uncertai

Darrell Duffie and Haoxiang Zhu of Stanford Graduate School of Business have argued proposals for derivatives clearing become more attractive from a counterparty risk reduction perspective if a single CCP handles clearing for all large global dealers in Europe and the US. Ideally, credit derivatives should be cleared together with interest-rate swaps in the same central clearing counterparty, they said. Carving off a particular class of derivatives for clearing only makes sense if the volumes an

The intense regulatory scrutiny that put credit derivatives in the limelight in 2008 and 2009 has not affected interest rate derivatives to the same degree, keeping such securities largely out of the news. But while product innovation may have fallen by the wayside for the time being, further distancing the asset class from the spotlight, activity has been booming. For many banks, interest rate derivatives have become the bread-and-butter business of their derivatives efforts over the last 12 mo

As a long-only business model, property investment has long appeared to be a natural candidate for a liquid derivatives market. That was certainly the view around five years ago, when the first tradable property derivatives were established to provide insurance against losses. Volumes were growing steadily until global property prices plummetted from their highs of mid-2007. Property derivatives volumes were decimated through the second half of 2008. Figures from International Property Databank

The derivatives industry is facing the biggest regulatory upheaval in its history. Politicians are set to clamp down on what they view as an opaque business that played a central role in the financial crisis of 2008. The US is leading the stampede with a heavy-handed approach to pushing industry reform. Although the changes are only just beginning to take shape, corporates and other end-users are lobbying hard to ensure that new legislation is not so severe that it ravages their cash flows and p

Since the market bottomed in March, global equity markets have bounced back impressively. The Eurostoxx 50 is up 60% from its lows, the S&P 500 is up 58% and the FTSE 100 has surged 47%. “The cash equity market is definitely out of crisis mode,” said Simon Yates, co-head of EMEA equities with Credit Suisse in London. “It’s always the last asset class out, because it’s the furthest end of the risk spectrum, and it needs three big things to happen before you can say you’re out of the woods. On two