Korean equity index volumes rocket, says BIS review

Korean and Japanese equity index contract volumes were the highlight of derivatives trading in the first quarter of this year, according to the Bank for International Settlements (BIS), whose quarterly review of banking and financial markets developments was released today.

In Korea, trading in index derivatives expanded by 20%, making the Seoul market-place the second most active after Chicago, said the BIS. Turnover in Korean contracts went hand-in-hand with a remarkable performance of the underlying equity market.

In Japan, a sharp upswing in the trading of index contracts reflected a rebound from a near record-low in January. Part of the surge in trading may have resulted from the new ‘uptick’ rule for the cash market, with investors turning to the futures market for the short positions that had become difficult to take in the cash market. Globally, trading in equity index derivatives contracts grew by 5%.

But the aggregate turnover of exchange-traded derivatives contracts monitored by the BIS declined slightly in the first quarter of 2002, following a record volume of activity in the previous quarter, said the BIS. The notional value of transactions slipped by 1%, in part because the absence of major policy rate moves brought a measure of calm to fixed-income markets.

Although trading in eurodollar futures remained buoyant, options transactions on those futures contracted sharply. This followed a year of intense hedging activity induced by a surge in US mortgage refinancing, said the BIS review.