While geopolitical tensions has always been a factor in the derivatives market, it has come to the fore given the ongoing conflicts in the Middle East and Ukraine as well as the more recent US interventions in Venezuela and Iran, according to a new report – Drivers of derivatives market change in 2026 (https://www.greenwich.com/market-structure-technology/drivers-derivatives-market-change-2026) by Crisil Coalition Greenwich.
The study, which canvassed 220 derivative market participants including end users, intermediaries and infrastructure providers, found that the top three catalysts are geopolitical conflict, prediction markets and tokenisation. Meanwhile, the regulatory agenda and focus on reporting standards, which had been a top concern in the past, dropped to fifth place on this year’s list.
It is no surprise that geopolitical tensions was in pole position for almost half of respondents given the turmoil caused by the various conflicts. However, different segments had their own views with 63% of end users putting it at the top of their list. They tend to be the most exposed to market spikes which causes asset prices and the cost of trading to fluctuate.
By contrast, just 39% of intermediaries felt the same mainly because an increase in volatility and volume can be good for business, as most are ultimately paid on turnover. However, as Stephen Bruel, author and research director on the Market Structure & Technology team, said, “regardless of your place in the ecosystem, these market conditions are often when derivatives show their true value. Whether used to speculate on market change or protect against uncertainty, derivatives markets thrive when volatility”.
The report noted that overall prediction markets and tokenisation, which had minor roles just a few years ago, have moved closer to centre stage thanks to a friendlier US regulatory environment as well as the recent addition of sports-based event contracts.
However, 38% voiced concerns that prediction markets encouraged gambling and undermined the reputation of the futures market. In addition, the number of respondents with a negative view increased 10 percentage points to 38% from 28% a year ago. This may be due to the rapidly increasing growth which has magnified fears about the potential for insider trading and market manipulation.
Currently, activity is dominated by retail traders with liquidity being the main problem for their institutional counterparts. However, 23% of the study’s respondents think they could be beneficial to the futures market while nearly half are adopting a wait and watch approach before potentially taking the plunge.
As for tokenisation, opinions are more divided with Intermediaries thinking it is the most important issue facing the industry while only 16% of end users share that view. Over a third of this segment acknowledge though that incorporating it into collateral management could be a game changer, nearly the same percentage as AI. This is attributed to the efficiencies it can generate on the operational and capital level especially as trading moves to 24/7.
