Financial Innovation Blossoms in the Credit Sector
In a significant development, a futures market for credit is being considered for establishment. This potential move comes after a comprehensive study by Crisil Coalition Greenwich, titled "The Future of Credit Futures," which examines the benefits and potential roadblocks of such a market for credit investors.
The report, based on interviews with 41 credit investors in the US, UK, and Europe, traces the evolution of the credit futures market. It highlights that approximately 85% of U.S., U.K., and European credit investors are already aware of credit futures.
Kevin McPartland, Head of Research at Crisil Coalition Greenwich, emphasizes the importance of educating trading desks about credit futures for their growth. He predicts the growth of credit futures in the months ahead.
The report identifies potential use cases for credit futures within investment portfolios, such as tactical asset allocation, overlay management, and efficient adjustment of overall exposure to the credit market. Futures offer a means to hedge existing positions or implement views on credit spreads, providing similar advantages to those in equities and interest rate markets.
Regulatory rulings, the boom in credit ETFs, the growth of quantitative credit trading, and other market developments have created favorable conditions for the establishment of a credit futures market. Notably, institutions including Barclays, BNP Paribas, Citi, Credit Suisse, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Nomura, and UBS have committed to the CRISIL Coalition Greenwich credit futures study project.
However, it's important to note that the report does not mention any new regulatory rulings or market developments that could impact the establishment of a credit futures market. Additionally, the report acknowledges that widespread adoption of new futures contracts can take time, and it may take five to ten years for credit futures to become established.
The report also examines the primary roadblocks to the adoption of credit futures. Previous attempts to establish a credit futures market a decade ago were not successful. Nevertheless, the potential benefits and growing awareness among credit investors suggest a promising future for credit futures.
In conclusion, the "The Future of Credit Futures" report offers a comprehensive analysis of the potential benefits of credit futures for credit investors. As the market continues to evolve, it remains to be seen how quickly credit futures will become a mainstream part of credit investing.
Read also:
- Susanne Otto to Develop Additional Housing Units
- Deepwater Port Construction Permits for Projects within the South Central Region's Air Regulations
- Citizen Thekla Walker, Minister, urges: "Let's face our responsibilities at home"
- Editorial Correspondence: Justifying the Elimination of a Program Earmarked for Reducing Our Own Carbon Footprint?
