Derivatives markets are sprouting up all over Eastern Europe.
But there's one major problem: most of the underlying securities markets lack sufficient liquidity, acknowledged Ondrej Ivanco, director, trading division of the Bratislava Stock Exchange in Slovakia.
There are signs of improvement, however. The average daily volume at the Bratislava Option Exchange is up 30 times since it started trading in April 1993, Vladimir Karasek, the exchange's chief executive officer said at Focus Europe, a conference on managed futures and derivatives. But that's still only a few contracts a day.
Rather than have one exchange for securities and another for derivatives, Poland offers one-stop investing. "Securities and derivatives should ideally be under one roof," said Wicslaw Rozlucki, president of the Warsaw Stock Exchange.
Although these exchanges trail more developed markets by a wide margin in terms of liquidity, they are state of the art in technology.
"The technology gap (between Eastern European markets and developed markets) in derivatives is far smaller than it is for regular securities," said Jozef Rotyis, chief executive officer of the Budapest Stock Exchange. Futures trading started in Budapest five months ago and is fully computerized.
Now, only 15% of trading is done on the floor; Budapest exchange officials hope to eliminate floor-trading entirely sometime next year.
Still, volumes remain low. On July 21, for example, there were seven transactions involving 40 contracts worth a total of 35 million forints ($262,500). The highest value of contracts traded in any given day was 115 million forints ($862,500), while the number of transactions has never topped 50.