Monday, May 22, 2006

Global derivatives market expands to record US$298t

Insanity.

The global derivatives market expanded to a record US$298 trillion in the second half of 2005, led by a 34 per cent increase in contracts to insure debt payments, the Bank for International Settlements (BIS) said on Friday.

Credit-default swaps rose to US$13.7 trillion, the Basel, Switzerland-based bank said in its bi-annual derivatives survey.

Growth of the market for derivatives slowed to 5 per cent from 8 per cent six months earlier, based on those contracts traded outside of exchanges.

The credit derivatives market is expanding so quickly that banks have not kept up with the paperwork, leaving trades unconfirmed for days or weeks. Former US Federal Reserve chairman Alan Greenspan on Thursday said he found it 'appalling' that some people were recording the trades on 'scraps' of paper.

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