The US is in danger of losing its place as the world's leading financial center in the next decade without legal and regulatory changes, according to a report commissioned by New York Mayor Michael Bloomberg and US Senator Charles Schumer. Encouragingly for these types of reports the analysis also stretched to covering structured products rather than the derivatives market in general. The report can be accessed here.
“The UK and France in particular have well-established structured equity derivatives businesses that benefit from significant retail distribution,” the report notes. “Looking at the mix of business between flow and structured derivatives, Europe has a greater lead over the United States in the structured derivatives revenue market (60% versus 25%) than it does in flow derivatives (52% versus 32%). These revenue pools are likely to grow rapidly given the underlying market growth, with Europe the main beneficiary as London solidifies its position as the center for derivatives trading.”
Maybe so, but the report neglects that the US is arguably one of the fastest growing markets for structured products in the developed world. According to figures from the Structured Products Association, sales for structured products in the US stood at $48.7 billion at the end of 2005 and now they are hovering around $70 billion mark. That’s an impressive growth rate.
Perhaps the biggest challenge for maintaining the US position as a center of financial innovation is educating retail investors about the benefits of derivatives-based investments. If these figures are anything to go by the process is already underway.
Comments (1)
Another point worthy of note is the fact that exchange traded derivatives have found a home in Chicago. New York, as a result, is losing its claim to fame as THE center of financial innovation. That's not to say the US is losing that title as a whole.
Posted by JR | January 23, 2007 4:37 PM
Posted on January 23, 2007 16:37