Search for new OTC underlyings gets tougher

The history of the derivatives market has been punctuated by regular attempts to find new underlyings – never an easy task. But would-be innovators now face regulatory and political obstacles too. Lukas Becker reports

Longitude was supposed to shake up the way people trade and hedge. Offering an innovative auction-based trading system, and a new derivatives asset class referencing economic events such as the release of US employment numbers or GDP figures, the venture launched in 2002 with the backing of Deutsche Bank and Goldman Sachs. For the first time, market participants would be able to directly manage their exposures to the macro-economy, rather than using traditional, clumsy hedges based on stocks