Global Derivatives Market Reached $270 Trillion in 2005

The derivatives market is growing rapidly and catching up to the cash market. The notional value of derivatives globally grew from US$98 trillion in 2000 to US$270 trillion in 2005. In the first 3 quarters of 2006, Wall Street has made record profits from derivatives and structured products. New research from TowerGroup finds that US brokerage firms will generate $33.2 billion from derivatives related revenue in 2006.

TowerGroup sees enormous demand for derivatives from the buy-side, particularly relative to hedge funds, following the relaxation of restrictions on using derivatives for managing money. 

Highlights of the research include:

  • TowerGroup estimates global IT spending in derivatives will grow 18% annually over the next three years - much faster than the 4-6% for equities and fixed income. Top areas of spending will be risk management, processing and pricing/analytics.
  • TowerGroup estimates between 8-10% of U.S. sell-side revenue in 2006 will be driven by derivatives
  • Derivatives personnel salaries going up by 30-40% over the last 2 years.
  • TowerGroup believes the fastest growth area for derivatives globally will be seen in emerging markets.

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