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Credit derivatives market predicted to reach USD 8.2 trillion by 2006

London will dominate the global market in credit derivatives which is expected to rise to USD 8.2 trillion by the end of 2006 according to a new report.

The report by the British Bankers Association (BBA), based on a survey of 30 market leaders in credit derivatives, predicts that London will remain the world's dominant centre for credit derivatives products with its annual trading volume expected to more than double by 2006 to USD 3.563 trillion.

The complete executive summary of the report can be downloaded from the Hedge Reports section on the home page at

According to the practitioners surveyed, banks, securities houses and insurance companies still constitute the majority of market participants. However, hedge funds, which emerged as players on the buy side of the market in the last report produced by the BBA in 2002, have this year also become major players on the sell side and are predicted to have a greater share of the market than securities houses by 2006.

Ian Mullen, chief executive of the BBA said: "Increased market liquidity, improved standardisation within the market and a greater understanding by clients have all been instrumental in the continued rapid growth of the global market in credit derivatives.

Mullen added: "With 66 per cent of all transactions during the last year being booked through London it has retained pole position by a long way and with other European centres, the Americas and Asia/Australia all trailing some way behind, it is set to dominate the market for some time yet."

The BBA survey is based on detailed questionnaires of 30 market leaders, as well as comments from a number of other market practitioners. Nineteen of the 30 have outstanding notional transactions of $50 billion or more, of which 12 were over $100 billion.

The BBA credit derivatives survey is widely considered the most comprehensive benchmark of market activity, expectations and sentiment. The five surveys (1996, 1997/8, 1999/2000, 2001/2002 and 2003/4) together represent one of the most comprehensive studies of the development of the sizes, applications, products and constraints of the credit derivatives market.

An executive summary of the survey can be downloaded from the Hedge Reports section on the home page at


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