Despite renewed turbulence in financial markets, derivatives trading has stabilized and will soon begin to rebound, the chief executive of interdealer broker GFI Group Inc. (GFIG) said Friday.

"In spite of the [Dow Jones Industrial Average] being at the six-year historic low, I'm quite confident we're at a bottom in terms of trading volumes in our marketplace," said Michael Gooch, chief executive and founder of GFI Group, as the company reported lower profits for the fourth quarter of 2008 and forecast a continued decline in brokerage revenue for the first quarter.

Gooch said it would be three to five years before trading activity in structured products and derivatives makes its way back to pre-crisis levels, though sectors like equity derivatives and emerging markets "will rebound in due course."

"It looks to me that we're at a stabilized base," Gooch said.

Gooch said he also sees signs of life in credit derivatives trading, and introducing central clearing to the $30 trillion market may help revive volume.

While exchanges and clearinghouses in the U.S. and Europe are competing to clear trades in the over-the-counter credit default swaps market, Gooch said banks prefer a dealer-backed clearing solution for credit derivatives, and don't want to deal with multiple clearinghouses.

In the U.S., a clearinghouse developed by Atlanta-based IntercontinentalExchange Inc. (ICE) has secured support from nine banks following ICE's planned acquisition of The Clearing Corporation, a bank-owned clearing entity that was working on its own CDS clearing service prior to the ICE deal.

GFI is also a Clearing Corp. backer.

Across the Atlantic, London-based LCH.Clearnet - another bank-owned entity - announced plans of its own to launch credit derivatives clearing by the end of the year.

LCH.Clearnet is already partnered with NYSE Euronext (NYX) to clear credit derivatives trades via the BClear platform, which remains the only operational service for the swaps. The financial chaos that broke last fall and put the spotlight on clearing CDS trades may have actually slowed dealers' move toward clearing, Gooch said.

According to Gooch, regulatory turf battles in the U.S. and Europe over who will supervise credit derivatives put the brakes on dealers, who were already moving toward central clearing for the market.

While some credit derivatives trading is taking place, Gooch said that clearing or no, volumes won't rebuild until some of the regulatory uncertainty around the market is resolved in both the U.S. and Europe.

GFI on Friday reported $192,000 in earnings for the fourth quarter, breaking even on a per-share basis, compared with $25.2 million, or 21 cents per share, for the year-ago period.

Brokerage revenue for the quarter declined 19% to $193.8 million as GFI cut brokerage desks and headcount over the quarter in part of a restructuring effort, which translated to lower trading, according to officials.

Brokerage revenue in the first quarter is expected to continue to decline 34% to 37% year-on-year, with overall revenue down 32% to 35%.

Gooch said if business remains tight, and markets continue lower, there are "certain initiatives in technology" that GFI could scale back to reduce costs, but for the time being the company continues to pursue these, and he emphasized the company's strong cash position.

James Peers, chief financial officer, estimated GFI's cash balance stood at about $342 million at the end of 2008, with about $190 million available to manage cash operations.

"We might have seen downturns in our business, but we've still had pretty good years and we're making money," Gooch said. "We see opportunity right now to gain market share against the competition and those of us who have money in the bank are in a better position to do that."

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com