Magazine article Global Finance

Derived Value

Magazine article Global Finance

Derived Value

Article excerpt

The spread of technology, combined with business executives' growing desire to manage risk, helped boost the total of futures and options contracts traded on exchanges around the globe by nearly 20% last year, according to the Futures Industry Association in Washington, DC. The number of contracts soared to nearly 11.9 billion in 2006, up from 9.9 billion contracts in 2005. That jump was substantially greater than the 12% increase in 2005 over 2004 volume, and even higher than the 9% expansion in volume between 2003 and 2004, according to figures provided by the association.

"As more trading is done electronically, that lowers the cost of trading, and it's more liquid," says Galen Burghardt, senior vice president and director of research at Calyon Financial, a global brokerage firm headquartered in Chicago, and an adjunct professor of finance at the University of Chicago's Graduate School of Business. "And as it becomes more liquid, the volume goes up," he explains. Finance professionals-from risk managers at banks to portfolio managers of pension funds-are also increasingly turning to derivatives to manage their risk, he adds.

Culled from about 60 exchanges, the association figures show that the Korea Exchange (KRX) maintained the top slot, with nearly 2.5 billion contracts being traded in 2006. The second position went to Frankfurt-based Eurex, the global derivatives trading exchange operated by Deutsche Börse and SWX Swiss Exchange, with 1. …

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