FT.com / Capital markets - Equity derivative trades on rise

The turmoil in the capital markets is beginning to effect our daily lives.  Today, for the first time, I lost some new business because of the credit crunch which has frozen budgets in a client company.  Then, later in the day, I got a note from a mortgage broker that I have used in the past, saying that his company is stopping all lending in New England and that he is moving to a different job.

At the same time, the U.S. stock market is up over 80 points today as investors anticipate a rate reduction by the Federal Reserve.  And, the Financial Times reports that Equity derivative trades are on the rise.  Now, I thought that derivatives, because they lack transparency that is required for stable markets, are part of the reason for the credit crunch. Investors are using sophisticated equity derivative trades to bet on the stronger performance of large multinationals against their smaller rivals in the wake of the credit squeeze. This workout will be interesting to watch.

Meanwhile on the ground, at home, we begin to feel the squeeze.

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