Thursday, May 22, 2008

BIS reports 2007H2 OTC derivatives market activity

The OTC derivatives market showed relatively steady growth in the second half of 2007, amid the turmoil in global financial markets. Notional amounts of all categories of OTC contracts rose by 15% to $596 trillion at the end of December (Table 1). Growth remained particularly strong in the credit segment, where the notional amounts of outstanding credit default swaps (CDSs) increased by 36% to $58 trillion. Expansion in the foreign exchange, interest rate and commodities segments was also relatively robust, recording double digit growth rates, while the equity segments showed a negative growth rate. Gross market values, which measure the cost of replacing all existing contracts, increased by 30% and reached $15 trillion in total at the end of December 2007. Gross credit exposures, after netting agreements, also rose by 22% to $3.3 trillion.

The following trends are noted in the statistical release:

  • Strong growth in credit default swaps
  • Solid growth in FX derivatives
  • Moderate growth in interest rate derivatives
  • Subdued activity in equity derivatives
  • Robust growth in commodity derivatives
  • Market concentration stable and low, particularly for FX derivatives

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