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After the slump: Rates trading recovers, but market is changing
09 April 2010
It was a long time coming, but the recovery in listed interest rate derivatives now seems well under way. But as Elise Coroneos reports, the market will not just go back to the way it was; this year is going to be lively.
Read more:
[interest rate derivatives]
[CBOT]
[ELX]
[Neil Wolkoff]
[fixed income derivatives]
[STIRs]
Traders are wary of being triumphant, but the slump of more than a year in listed fixed income derivatives definitely seems to be over.
In February, all three of the big exchanges – CME Group, Eurex and NYSE Liffe – enjoyed a strong recovery in trading of interest rate futures and options.
These products, like many financial instruments, were left stranded by the big retreat from risk of late 2008 and early 2009.
Hedge funds and other investing institutions slashed their positions and deleveraged their balance sheets, leading to sharp falls in trading volume and open interest.
Many dealers were able to capitalise by widening their bid/offer spreads, profiting from investors that had to put on trades. However, wider spreads could not make up for the fact that many of what were once big players in these highly liquid markets had seized up or died.
Nor could it hide the fact...
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