Back in April, JP Morgan consigned equity capital markets (ECM) to the recycling bin of history. In its place, the bank unveiled the boldly named equity capital and derivatives markets (ECDM) team. Not an earth-shattering transformation perhaps, but certainly part of an important trend. UBS Warburg followed suit in May, formally merging its equity derivatives and ECM departments. Most of the other big-league investment banks had already made equivalent reorganisations. It is not hard to work out why ECM groups have fallen in love with derivatives. As one investment banker puts it: "You'd never find such a consensus if the clients weren't demanding it."

Serge Marquie, co-head of the strategic transactions group at Deutsche Bank, says: "The most significant long-term driver of the change is the huge improvement in the sophistication of corporate management in Europe. Derivatives teams used to deal with the treasury departments of big companies. The chief executives and chief financial officers that we talk to now have nearly all been to US business schools and have a much greater awareness of the possibilities offered by financial engineering."