The World Federation of Exchanges calls for greater role for derivatives market

 

PRESS RELEASE

The World Federation of Exchanges calls for greater role for derivatives market

London, 25 March 2025 – The World Federation of Exchanges (WFE), the global trade association for exchanges and clearing houses, has published a paper today calling for a global, evidence-based refresh of public policy on derivatives. The paper sets out a coherent approach to derivatives in order to nurture their use, especially in regulated, lit environments, to avoid the development of an off-exchange derivatives market that is opaque and less fair to investors.

It is essential that all types of users have access to derivatives to manage economic uncertainty. This means avoiding bureaucracy and blocks on their use, while monitoring all off-exchange and all uncleared derivatives more vigilantly and systematically. The role of exchanges in price discovery and clearing houses in neutralising counterparty risk should be nurtured, as without a thriving public derivatives market, participants will turn to less well-regulated trading venues to manage risk, jeopardising the health of the financial system.

Listed markets constitute the safe, reliable, and verifiable core of derivatives, as they do for other financial instruments, and regulators must ensure they can continue to do so. Public policy should rethink measures that push derivatives trading into under-regulated environments and develop a policy framework that encourages trading on lit public markets to benefit from their numerous public-good aspects.

Nandini Sukumar, CEO of the World Federation of Exchanges, said, “Public markets are the best place to trade derivatives. Any policy being considered that impedes the growth of exchange-traded derivatives misunderstands the vital role they play in managing risk. Fifteen years on from the collapse of Lehman Brothers, it is important not to let markets slip into the bad old ways and, if anything, bring more transactions into the scope of margining and clearing. The real risk is that regulatory, tax or other measures push customers into a less well-regulated place.”

Richard Metcalfe, Head of Regulatory Affairs at the World Federation of Exchanges, said, “Exchange-traded derivatives, with their integral central clearing arrangements, bring clarity as to what the price is and who holds risk positions. They provide the foundation for healthy, well-regulated derivatives markets, which bring huge benefits to savers and businesses, small and large. The balance of regulatory incentives, as between OTC and listed derivatives, should continue to reflect this reality. At the same time, any temptation to load costs onto CCPs, rather than charging the risk-taking market participants, should be resisted to maintain the correct incentives for those risk takers. Measures such as the current EU restrictions on CFDs are a good example of ensuring the highest standards apply across all parts of the derivatives world.”

Read the full paper here. 

For more information, please contact:

Cally Billimore 

Communications Manager 

[email protected]

+44 7391 204 007

 

About the World Federation of Exchanges (WFE):

Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 250 market infrastructure providers, including standalone CCPs that are not part of exchange groups. Of our members, 37% are in Asia-Pacific, 43% in EMEA and 20% in the Americas. WFE’s 87 member CCPs and clearing services collectively ensure that risk takers post some $1.1 trillion (equivalent) of resources to back their positions, in the form of initial margin and default fund requirements. WFE exchanges, together with other exchanges feeding into our database, are home to over 49,054 listed companies, and the market capitalisation of these entities is $116.58 trillion; around $155 trillion (EOB) in trading annually passes through WFE members (at end 2024).

The WFE is the definitive source for exchange-traded statistics and publishes over 350 market data indicators. Its free statistics database stretches back 49 years and provides information and insight into developments on global exchanges. The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares regulatory authorities’ goals of ensuring the safety and soundness of the global financial system.

With extensive experience of developing and enforcing high standards of conduct, the WFE and its members support an orderly, secure, fair and transparent environment for investors; for companies that raise capital; and for all who deal with financial risk. We seek outcomes that maximise the common good, consumer confidence and economic growth. And we engage with policy makers and regulators in an open, collaborative way, reflecting the central, public role that exchanges and CCPs play in a globally integrated financial system.

Website: www.world-exchanges.org

Twitter: @TheWFE

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