Growth in derivatives trading speeds up, says BIS

Trading on international derivatives exchanges has continued to pick up pace, according to the latest Bank for International Settlements Quarterly Review. Combined turnover in interest rate, equity and currency derivatives rose by a quarter from January to March 2006 to $429 trillion. But the growth of credit default swap (CDS) trades slowed.

Trading in interest rate products grew by 26% in the first quarter amid expectations of higher interest rates in the US and Japan. Uncertainty over the timing of US interest rate rises caused a 38% increase in the trading of short-term US interest rates. Turnover in futures and options on 30-day federal funds doubled to $36 trillion in the first quarter, while open interest in these contracts rose by 71% to $12 trillion.

However, growth in CDS trading slowed in the second half of 2005. The notional amounts of CDSs increased by one third to $14 trillion. That follows a 60% increase in the first six months of last year.

Jayne Jung.

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