Global market uncertainties, soaring volatility, weak macroeconomic news, disappointing earnings results and reports of corporate irregularities dominated 2002. If that was bad news for some, the resulting rounds of hedging meant the year was a good one for the derivatives industry – volumes were up.

But they were not up equally. Mounting credit concerns meant the exchanges proved the biggest
beneficiaries of the continued growth of the derivatives market. Their use of central counterparties helps to offset counterparty risk by guaranteeing all transactions, even if one side of the deal collapses. Because over-the-counter (OTC) trades have no such guarantee, users are exposed to counterparty risk.