Many global options exchanges are planning to list and trade over-the-counter options over the next year, a recent Accenture study found. The consultancy spoke to senior executives at 50 exchanges, including NYSE Group, Euronext and the London Stock Exchange, as well major buy- and sell-side firms. The OTC market now handles over USD220 trillion in notional, while the listed market runs to about USD49 trillion.
Concerns over lack of transparency, risk, capital employment and processing efficiency will likely drive OTC trading toward the exchanges, said Bill Cline, global managing partner at Accenture in New York and one of the authors of the study. "While many of the larger firms are already managing these issues upstairs, many of the mid-market and smaller firms are relying on exchanges to provide them with a pool of liquidity for OTC derivatives. Listing these products repeatedly came up as an area of growth in the interviews," he said.
Over 83% of all derivatives are traded off the exchanges, so the exchanges want to find ways to take a stake in that market amid increasing competition in the listed segment. "Dropping the anchor and riding out the storm won't be a winning strategy," Cline said.
