Commodities saw more growth than other derivatives in 2012 -WEF

Fri Mar 8, 2013 12:15am GMT

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* Volume in commodity futures, options up 19 pct last year

* Equities, interest rate and currency derivatives down

By Barani Krishnan

NEW YORK, March 7 (Reuters) - Commodity futures and options were the only derivatives that saw growth in trading volumes last year, the World Federation of Exchanges said, amid what analysts said was a weak U.S. market after the MF Global and Peregrine broking scandals.

The number of commodity derivatives traded across the world rose by around 19 percent for a second straight year in 2012, reaching 3,265 contracts in all from 2,749 in 2011, the Paris-based WEF said in a statement issued on Thursday.

In comparison, interest rates instruments registered a 15 percent decline in derivatives volume; securities for equities showed a fall of more than 15 percent and currency derivatives marked a drop of over 22 percent.

And for the first time since 2004, the number of exchange- traded derivatives worldwide decreased 15 percent to a total of around 21 billion.

"The only segment that experienced an increase in 2012 was commodities," WEF said.

"This increase in volumes was partly, but not only, explained by mainland Chinese exchanges that experienced a 34 percent increase and that accounted for 41 percent of the global volumes in 2012."

Although the WEF cited China as a contributor to last year's growth in commodities, it did not break down trade by country, meaning there were no numbers to compare volumes in China with those in the United States, the world's No. 1 economy.

The growth in commodity trading volumes was at odds with the activity in U.S. markets last year after the collapse of major brokers MF Global and Peregrine Financial, analysts said.

"From what I know, the U.S. marketplace for commodities was pretty much damaged in 2012 from the MFG and Peregrine sagas, and I speak from evidence of my own trade volumes and what I know of other FCMs (futures commissions merchants)," said Sean McGillivray, vice president at Great Pacific Wealth Management in Oregon.

MF Global declared bankruptcy in October 2011 after regulators found an estimated $1.6 billion hole in customer accounts at its U.S. broker-dealer unit and determined that the money had been improperly used to cover corporate needs.

In Peregrine's case, it filed for bankruptcy in July 2012, listing more than $500 million in assets and over $100 million in liabilities. Former chief executive Russell Wasendorf Sr. is serving a 50-year sentence for bilking $215 million from customers of the failed futures brokerage.

Revenue from commodities trading at global investment banks fell by a quarter last year from 2011, making the asset class the worst performer in the fixed-income business of banks, according to London-based Coalition, a financial services analytics company. (Reporting by Barani Krishnan. Editing by Andre Grenon)

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