Derivatives decline hits dealers’ earnings

A decline in corporates’ use of equity derivatives and institutional investors’ moves out of the plummeting equity markets have hit some dealers’ second-quarter earnings. For example, Merrill Lynch last month reported an 18% decline in second-quarter trading revenue, which it blamed principally on a drop in equity derivatives business. Merrill says the decline in equity derivatives was due to reduced customer flow and lower volatility during much of the first quarter.

While dealers agree the