BIS releases latest statistics on OTC derivatives

Today the BIS releases the latest statistics on positions in the global over-the-counter (OTC) derivatives market. These comprise the results of the second part of the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity as well as the regular semiannual OTC derivatives statistics.

  • Positions in the OTC derivatives market went up in the three years since the last Triennial survey (+15%, or 5% annualized) to $583 trillion, but at a slower pace than during the previous period from 2004 to 2007 (+ 131%, or 32% per year). Data from the semiannual survey shows that the modest overall increase is the result of a surge in positions until June 2008, followed by a decline in the wake of the financial crisis. Growth in gross market values, which provide a measure of the counterparty risk of these positions at prevailing market prices, increased far more than notional amounts outstanding, going up by 122% to $25 trillion at the end of June 2010 . This compares to a growth of 74% during the previous (2004-07) reporting period.
  • The modest overall growth in notional amounts outstanding hides significant variations across risk categories. The highest growth was recorded in the interest rate segment of the OTC derivatives (25%), bringing the share of this risk category in the market total to 82%. Positions in foreign exchange derivatives went up by 9%. By contrast, amounts outstanding of the other OTC segments declined substantially, ranging from 30% and 40% (equity and credit) to 60% (commodity contracts). Sharp movements in asset prices, related to a reassessment of risks during the financial crisis, drove up gross market values of foreign exchange (100%), credit (88%) and interest rate derivatives (175%). Gross market values of equity and commodity contracts declined.
  • Data from the semiannual survey shows that, in the first half of 2010, growth in amounts outstanding was subdued or negative in all risk categories. Positions of all types of OTC derivatives fell by 4% to $583 trillion, following the 2% increase in the second half of 2009. The decline occurred against the backdrop of deteriorating market sentiment related to the European sovereign debt crisis. However, much of the contraction reflected a valuation effect due to the depreciation of European currencies against the US dollar, the currency in which the data are reported. In contrast to the decline in the positions, gross market values for existing OTC contracts rose by 15% to $25 trillion at end-June on the back of sharp asset price movements. Gross credit exposures, after netting agreements, which had dropped slightly in the half-year up to end-2009 (-6%) increased by 2% to $3.6 trillion.
  • Notional amounts outstanding of credit default swaps (CDS) declined for the fifth consecutive semiannual period, largely due to terminations of existing contracts. Gross market values for single-name contracts dropped by 16%, while those for multi-name contracts rose by 10%. The latest semiannual survey introduces additional information on the importance of central counterparties (CCPs) in the CDS market. At end-June 2010, about 11% of CDS positions were vis-à-vis a CCP 1 . The CDS counterparty breakdown for contracts with other financial institutions has also been expanded. In particular, special purpose vehicles (SPVs) and hedge funds are singled out for the first time. CDS contracts with hedge funds and SPVs account for about 5% and 4% respectively of total notional amounts outstanding with other financial institutions.

A detailed analysis of elements of the 2010 Triennial Survey and of the end June 2010 semiannual OTC derivatives statistics will be made available in the forthcoming December BIS Quarterly Review. In particular, the publication will include special features on structural changes in the CDS market, on derivatives in the emerging economies, on the drivers of growth in FX markets, and a user's guide to the Triennial survey.

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