Volatile stock markets are driving UK private investors to derivatives, according to execution-only broker E*TRADE, which reports a 23% rise in contracts of difference (CFDs) trades and 42% surge in spread betting. The rises, based on trading volumes for Q2 of this year versus Q2 2006, come following market corrections in February, June and the latest bout of volatility this month.

Salim Sebbata, senior director of UK Retail at E*TRADE, says: 'UK investors are gravitating to derivatives in light of several variables – the direction of the US market, the softening domestic housing market, and rising interest rates – all of which contribute to potential volatility and a desire to hedge.'