The exchange-traded equity derivatives market volumes have surged to record highs in the first four months of the year in Europe as hedge funds and algorithmic traders increasingly seek new avenues for alpha generation with increasingly complex trading strategies that involve their use. Equity derivatives contracts are also now being used more by traditional funds, such as pension and life companies, as they take advantage of European regulations such as UCITSIII that give them more freedom to invest.

The Financial Times today reported that Equity derivative volumes rose by 22%, with 127m contracts traded in the first four months of the year on Euronext Liffe, the international derivatives exchange. This follows record figures published last week by Eurex, the other leading European equity derivatives exchange, which saw volumes rise by 52%, with 365m contracts traded in the first four months of the year. Although the figures do not take into account over-the-counter trading, which attracts the lion's share of business, they point to the growing trend in their use.