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Derivative Trades Last Year Rose the Most Since 2003 as Commodities Surged

Global derivatives trading on exchanges rose the most since 2003 last year as volume for contracts listed to commodities surged, the World Federation of Exchanges said.

Volume rose 25 percent to 22.4 billion contracts last year, according to a statement from the Paris-based trade group, which has 52 members that list a total of 45,000 stocks around the world. Commodity derivatives trading rose 34 percent, with Chinese exchanges making up more than half of that volume, according to the report.

“Reforms in regulation of over-the-counter derivatives markets are causing participants to shift some of their risk transfer activities to exchange-traded derivatives,” Ronald Arculli, chairman of WFE and chairman of Hong Kong Exchanges & Clearing Ltd., said in the statement.

Investors are turning to exchange-listed derivatives instead of private, customized over-the-counter transactions, Arculli said in the statement. The outstanding notional amounts of OTC contracts fell by 13 percent from June 2009 to June 2010, WFE said, citing data from the Bank for International Settlements.

Futures trading increased 35 percent last year to 11.2 billion contracts while options trading rose 16 percent to 11.1 billion, according to WFE. Volume was 17.8 billion in 2009, WFE said.

Equity derivatives trading rose 14 percent last year, with the fastest growth rate, 20 percent, in Asia. Interest-rate derivatives increased 29 percent, reversing a 23 percent plunge in 2009. Currency derivatives rose 144 percent to 2.3 billion, the smallest segment, with 71 percent of volume concentrated in Indian markets.

Derivatives are contracts that have values determined by the underlying assets. Futures are agreements to buy or sell an underlying commodity or financial product at a determined later date. Options give the right, without the obligation, to buy or sell a security at a certain price by a given date.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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