Global Derivatives Markets! Overview of global derivatives markets prepared for:!!! SYMPOSIUM ON BUILDING THE FINANCIAL SYSTEM OF THE 21ST CENTURY: AN AGENDA FOR INDIA AND THE UNITED STATES! January 2016!
Benefits of Transparent Derivatives Markets! Support real economy objectives:! Price discovery: provide price signals to manufacturers, commodity producers, investors on a range of economic inputs (FX, government debt, commodities, etc.)! Risk transfer: Enable economic players to effectively manage risks (e.g. lock in a favorable commodity price)! G20 derivatives reforms are taking shape: Increasing transparency, managing counter-party credit risk, promoting safety and soundness! Dodd-Frank Act in U.S.! EMIR / MiFID 2 in EU!! IOSCO Principles for Financial Market Infrastructure! 2!
Futures markets are an important component of overall financial markets! Key components of resilient futures markets: ü Diverse mix of market participants (commercial end-users, asset managers, liquidity providers, etc.) ü Significant liquidity ü Transparency ü Effective and efficient regulatory oversight ü Cross-border regulatory coordination and access ü Globally and/or regionally relevant products 3!
Rapid Growth of International Markets! Growth in both exchange-traded derivatives and assets under management in international markets ETD derivatives revenue ($B) $28B CAGR (%) Assets under management ($T) $100T CAGR (%) $25B 12% Latin America 20% $87T 2% Latin America 21% $21B $14B $11B 10% 14% 29% 16% Asia Europe 36% 11% $75T $50T $58T 1% 19% 29% 27% 26% Asia Europe 16% 6% $7B 21% 55% 43% North America 11% $25T 51% 45% North America 6% 0 2010 2015 0 2010 2015 Non-US customer growth in financial markets will substantially outstrip US customers over the next 5 years, especially in Asia and Latin America *Source: FIA, BCG Global Asset Management Report, BCG analysis 4!
Global Derivatives Market! 21.7 billion ETD contracts traded on exchanges worldwide! Source: WFE/IOMA Derivatives Markets Survey, August 2015! 5!
India Capital Markets Growth and Potential! Indian markets have grown significantly since their liberalization in 2003 - India now has 2 exchanges that place in the top 15 exchanges in the world (FIA)! - Products traded in India consistently rank among the top 5 in the world (i.e. gold/silver/ copper + NIFTY + INR/USD)! The global importance of India s economy, its growth and position as one of the engines of global growth, and its growing demand for raw materials and commodities make India compelling to be a priority country - India economy expected to be third world giant by 2050 - Working age population expected to continue to grow through 2040 - India has a growing middle class of approximately 300M with increasing saving rates and an appetite for a variety of investment products Untapped customer base of large commercial producers and consumers, trading firms, asset managers, etc. Notes: [1] source: PWC report World in 2050; [2] source: United Nations; [3] IMF!
Indian Market Development Opportunities! To reach the point where India is today in the market, much progress has been made including legislative changes and market infrastructure development; however challenges remain: - Cross border access! - Limited global participation!! Modi administration stated interest in developing vibrant, deep, derivatives markets! - Improved access to international financial markets by Indians! - Will encourage exports, in line with Modi s make in India initiative! - Will integrate India into the world economy another Modi initiative to make India global! Significant opportunity for India to continue to grow and internationalize its derivatives markets in line with its future position as a top 3 global economy 7!