The international derivatives markets are facing enormous problems. Some of these are already at the forefront, which is indicated by the number of banks and financial institutions pulling back from derivatives markets in many major markets. Other problems are just beyond the horizon, and are yet to come to the market.

The derivatives markets have become multi-trillion dollar markets over the past 15 years. Derivatives are financial commitments indexed or linked in some capacity to changes in the value of underlying assets. The bulk of the derivatives traded internationally are linked to currencies and interest rates. Other derivatives are linked to equities or equity indices. A very small volume of derivatives, compared to the total, are indexed to traditional commodities. Small by comparison to other derivatives markets, these commodities-indexed derivatives markets are large compared to the underlying physical commodities markets.

One of the problems faced by the derivatives markets is the making of the banks. They have cloaked the over-the-counter (OTC) derivatives markets in secrecy. They have marketed derivatives to institutional investors and pension fund managers who do not fully understand these powerful investment instruments, yet have been eager to add them to their portfolios without properly diagnosing what the implications of these derivatives are to their funds' financial stability, credit exposure, and overall performance. They have obscured the reality of these derivatives from everyone who would care to review them, including financial market regulators, customers, and shareholders.

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