Equity derivatives: Investors swap stocks for derivatives

Greater anonymity, leverage and lower trading costs are seen as incentives.

Equity derivatives are increasingly being used as a substitute for actual shares in North America, according to a recent report by Greenwich Associates.

The study of the equity derivatives market, released in November, shows that a growing proportion of investors are experimenting with equity derivative “flow” products, such as listed single-stock and index options, vanilla OTC single stock and index options, and equity swaps, as a means of gaining exposure and taking positions and as a way to minimize trading costs.

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