The growing complexity of derivatives should have cut their use but fund managers see volumes rising, writes Dan Barnes
The increased complexity of trading
derivative products – particularly over-the-counter
(OTC) – might be expected to have reduced their use,
but institutional investors report volumes are increasing.
Despite the apparently inhibiting impact
of derivatives regulation, the use of both over-the-counter
(OTC) and listed instruments by traditional asset managers
appears to be on the rise. Research in the last quarter of 2015
conducted on behalf of trading technology Calypso found that
45% of buy-side firms had upped their use of derivatives
trading since 2008, with 60% of respondents trading on a daily
or weekly basis.
Given the increased complexity of trading
these instruments over that period, the rise in their use would
appear to be a paradox. Two key developments in that period
which explain this conundrum have been the rise of the buy-side
trader and greater product innovation.
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