March 12, 2020

Greenwich Report on the Derivatives Market Structure 2020

A new (and public) report from Greenwich illustrates the challenges for the industry broken down by sell- and buy-side. 

FIA & Greenwich Associates have released a joint study on trading and clearing trends in derivatives markets. The study assesses market sentiment towards several major market structure trends, including the impact of capital requirements, the adoption of central clearing, the transition away from Libor, and the implementation of margin requirements on uncleared derivatives.  

The study reveals important insights on the views of financial institutions and commercial end-users that use derivatives to hedge risks and enhance returns. The study also reveals what market participants view as the key factors influencing the future growth of the derivatives clearing business.   

"This study provides a unique snapshot of industry views on several key trends in the derivatives markets," said FIA President and CEO Walt Lukken. "The responses from asset managers, hedge funds and other end-users are especially helpful in understanding the customer perspective on clearing." 

The research on which the study is based was conducted by Greenwich Associates, a leading provider of data, analytics and insights for the financial services industry. The research was based on responses from nearly 200 market participants to a questionnaire distributed by the two organizations in the fourth quarter of 2019. 

Some of the key takeaways from the study:  

  • Most of the respondents expressed a positive outlook for the derivatives markets, with a strong majority expecting further improvements in liquidity and product usage over the next 12 months.  
  • When asked about what changes they would like to see from policymakers, reducing barriers to cross-border trading and clearing was at the top of the list. 
  • The study revealed a steady shift in product usage from bilateral to centrally cleared derivatives across all asset classes as well as an appetite for further expanding the scope of cleared products.  
  • Asset managers, hedge funds and other customers cited "reduced counterparty risk" and "increased operational efficiency" as the most important economic incentives to use clearing. 

"Through our partnership with Greenwich Associates, we were able to gather feedback from a wide range of market participants and glean some important insights on current issues and concerns in the minds of derivatives market participants," said Will Acworth, senior vice president, publications, data and research at FIA. "We hope the study will serve as a valuable informational resource for FIA members and their customers."

Get your copy of the report via the FIA website here.

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