THE SHRINKING SHARE OF SHARES
The world's biggest stock markets are on a roll. In New York the Dow started March in the heady regions above 1700. In Tokyo, the Nikkei Dow soared through 14,000 and in London the FT Index surged past 1400. In both New York and London the volume and value of share trading ran at record levels.
Yet all is not well with the world's stockmarkets. In the US, home of the world's most sophisticated markets, the trade in equity derivatives is swamping the traditional share dealing business. Last year analysts reckon that stock index options and futures accounted for almost two thirds of the $30 billion stock and stock-related business done daily in the US. Ten years ago stock markets accounted for almost all of America's stock trading.
"The futures and options markets are now the market," said Eli Wachtel, Bear Stearns' associate director in charge of stock index arbitrage. "They're the most liquid." In February, business in the S&P 500 stock futures was running at a daily average of almost 83,000 contracts. Each contract represented just under $111,000 of stocks. That means that each day the futures market was trading the equivalent of $9.2