OTC derivatives activity diverged last year for credit default swaps, forex

While forex and interest rate OTC derivatives volume was higher in the second half of 2009, the notional value of outstanding credit default swaps slipped significantly -- perhaps a foreshadowing of activity under a more rigorous regulatory framework.

The press release from the Bank of International Settlements, which tracks global OTC markets, is below:

11 May 2010 – Key developments in the second half of 2009:

Notional amounts of all types of OTC derivatives contracts outstanding increased by 2% during the second half of 2009, rising to $615 trillion at the year-end. Interest rate and foreign exchange derivatives accounted for most of this increase. By contrast, overall gross market values decreased by 15%, following a contraction of 22% in the previous six-month period. Gross credit exposures fell by 6%, following an 18% decline in the previous period.

Notional amounts outstanding of CDS contracts continued to decline (-9%), albeit at a slower pace than in the first half of 2009 (-14%), while positions on commodities also receded, by 21%. CDS gross market values shrank by 40%, a similar rate of decline to that seen in the first half of the year (-42%). This brought the market value of the CDS contracts down to 35% of its end-2008 peak.

Comprehensive explanatory notes in the release define the coverage of the statistics and the terms used in presenting them.

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