Man Group PLC's purchase of a 70% stake in Eurex U.S. is the latest sign of burgeoning interest in red-hot equity derivatives markets.
The growth in equities derivatives also played a large part in the New York Stock Exchange's successful bid for Euronext NV in April.
What's happening is that equity derivatives are becoming as important as the stocks and markets to which they correspond. The real revolution, some experts say, is that cash and stock derivatives trading desks are converging. That means potentially significant efficiencies for money managers and hedge funds seeking to execute trades in both markets simultaneously.
"One of the benefits of the blending of these two desks and trying to make this a unified market is better intelligence," said Richard Block, head of global equity trading at Putnam Investments, Boston. "What we've seen at times is the tail wagging the dog. Heavy options trading on particular stocks or in particular sectors could lead to price action on stocks. If the sell-side desks are siloed, then the right hand might not know what the left is doing."
Interest in equity derivatives is growing fast. On Aug. 3, the New York Mercantile Exchange reported a record daily volume of energy futures contracts at 154,377, shattering the previous record of 140,380 on July 19. Additionally, the Chicago Board Options Exchange reported the total traded volume of options contracts on the Standard & Poor's 500 index was about 8.5 million in July, a 68% spike from July 2005.