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London emerges as key global centre for derivatives

Global derivative markets continue their relentless rise with the notional value of turnover in exchange-traded derivatives rising 22% in 2005.

This increase comes on the back of a 31% increase in the previous year.

The new edition of IFSL's Derivatives report features London's prominent role as a global centre for exchange-traded and over-the-counter (OTC) derivatives.

For example, in interest rate derivatives, 98% of trading at Euronext.liffe is in its London-listed short-term interest rate contracts.

Euronext.liffe is the second largest exchange worldwide, accounting for 27% of international exchange-traded turnover by value, exceeded only by the Chicago Mercantile Exchange with 45%. More than 90% of international business in non-ferrous metal futures is transacted at the London Metals Exchange. London is also an important source of remote trading, with 46% of Eurex trades originating from the UK in 2005, up from 31% in 2001.

The notional value of OTC derivatives turnover rose 36% between end-2003 and mid-2005 to reach USD 270 trillion. The UK reinforced its position as the leading global derivatives centre in the three years to April 2004 when its share of turnover in the over the counter (OTC) market rose from 36% to 43%.

London is also a major centre for niche OTC derivatives markets, such as credit, energy, and freight derivatives, which have grown rapidly in recent years. Credit derivatives tripled between 2002 and 2004 while freight derivatives rose fourfold between 2002 and 2005: 45% of credit derivatives are transacted in London. The newly established market in emissions trading reached GBP 3 trillion in 2004/05.

To view IFSL's latest report on the derivatives market in London, visit

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