Statistical release OTC derivatives statistics at end-June 2015 Monetary and Economic Department November 2015 Tools to access and download the OTC derivatives statistics: BIS website – tables in PDF of the BIS’s most current data BIS Statistics Explorer – a browsing tool for pre-defined views of the BIS’s most current data Data behind the charts in this release can be downloaded from the BIS website (www.bis.org/statistics/otc_hy1511_charts.zip). Questions about the OTC derivatives statistics may be addressed to [email protected]. This release is available on the BIS website (www.bis.org/publ/otc_hy.htm). © Bank for International Settlements 2015. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. OTC derivatives statistics at end-June 2015 Contents 1. Highlights ........................................................................................................................................................................... 2 2. Recent developments in OTC derivatives markets ............................................................................................ 2 Interest rate derivatives ......................................................................................................................................................... 3 Foreign exchange derivatives .............................................................................................................................................. 4 Credit default swaps ............................................................................................................................................................... 4 Equity-linked and commodity derivatives ...................................................................................................................... 5 3. Charts ................................................................................................................................................................................... 7 Annexes .............................................................................................................................................................................................. 11 A Explanatory notes ................................................................................................................................................ 11 B Glossary of terms ................................................................................................................................................. 12 Data are subject to change. Revised data will be released concurrently with the forthcoming BIS Quarterly Review on 6 December 2015. The OTC derivatives statistics at end-December 2015 will be released no later than 13 May 2016. The term “country” as used in this release also covers territorial entities that are not states as understood by international law and practice but for which data are separately and independently maintained. New publication tables In September 2015, the BIS comprehensively revised the tables it publishes on derivatives statistics. The new tables consolidate in one set derivatives statistics that were previously presented in several different BIS publications. Table numbers in this release refer to the tables available on the BIS website. Data in the new tables are also available in a new interactive tool, the BIS Statistics Explorer, where the OTC derivatives statistics can be downloaded in CSV format as well as plotted in charts. An example of a chart showing the notional amount outstanding of all OTC derivatives contacts is shown here. OTC derivatives statistics at end-June 2015 1 1. Highlights Highlights from the latest BIS semiannual survey of over-the-counter (OTC) derivatives markets: Activity in global OTC derivatives markets fell in the first half of 2015. The notional amount of outstanding contracts declined from $629 trillion at end-December 2014 to $553 trillion at end- June 2015. Even after adjustment for the effect of exchange rate movements on positions denominated in currencies other than the US dollar, notional amounts were still down by about 10%. Trade compression to eliminate redundant contracts was the major driver of the decline. The gross market value of outstanding derivatives contracts – which provides a more meaningful measure of amounts at risk than notional amounts – declined even more sharply in the first half of 2015. Market values decreased from $20.9 trillion to $15.5 trillion between end- December 2014 and end-June 2015. The fall is likely to have been driven by the reduction in notional amounts outstanding as well as increases in long-term interest rates, which took yields back closer to those on outstanding swaps. Central clearing, a key element in global regulators’ agenda for reforming OTC derivatives markets to reduce systemic risks, made further inroads. In credit default swap markets, the share of outstanding contracts cleared through central counterparties rose from 29% to 31% in the first half of 2015. In interest rate derivatives markets too, central clearing is becoming increasingly important. 2. Recent developments in OTC derivatives markets The overall size of the over-the-counter derivatives market continued to contract in the first half of 2015. The notional amount of outstanding OTC derivatives contracts, which determines contractual payments and is one indicator of positions, fell by 12% between end-December 2014 and end-June 2015, from $629 trillion to $553 trillion (Graph 1, left-hand panel, in section 3 of this release and Table D5 on the BIS website). Over this period, exchange rate movements exaggerated the contraction of positions denominated in currencies other than the US dollar.1 Yet, even after adjustment for this effect, notional amounts at end-June 2015 were still about 10% lower than at end-December 2014. The gross market value of outstanding derivatives contracts – that is, the cost of replacing all outstanding contracts at market prices prevailing on the reporting date – sharply decreased in the first half of 2015 (Graph 1, centre panel).2 The decline is likely to have been caused by a combination of falling notional amounts and narrowing gaps between interest rates on the reporting date and rates at contract inception. Following a one-off increase in the second half of 2014, the latest semiannual decline brought gross market values back onto the downward trajectory they had been on since end-2011. Market values decreased from $20.9 trillion at end-December 2014 to $15.5 trillion at end-June 2015, their lowest level since 2007 (Graph 1, centre panel). 1 Positions are reported in US dollars, and thus changes between periods include the impact of exchange rate movements on positions denominated in currencies other than the US dollar. For example, the depreciation of the euro against the US dollar between end-December 2014 and end-June 2015 resulted in a decline in the reported US dollar value of positions denominated in euros. 2 The gross market value is calculated as the sum of the absolute value of gross positive market values and gross negative market values. The gross positive market value is the gain to derivatives dealers – and the gross negative market value the loss – if the dealers were to sell their outstanding contracts at market prices prevailing on the reporting date. 2 OTC derivatives statistics at end-June 2015 Market participants can reduce their exposure to counterparty credit risk through netting agreements and collateral. Gross credit exposures account for that by adjusting gross market values for legally enforceable bilateral netting agreements (although they do not take account of collateral). Gross credit exposures equalled $2.9 trillion at end-June 2015, down from $3.4 trillion at end-December 2014 (Graph 1, right-hand panel). This measure of counterparty credit risk represented 18.5% of gross market values at end-June 2015, which was slightly above the average since 2008 (16.0%). Interest rate derivatives The interest rate segment accounts for the majority of OTC derivatives activity. At end-June 2015, the notional amount of outstanding interest rate derivatives contracts totalled $435 trillion, which represented 79% of the global OTC derivatives market (Table D5). At $320 trillion, swaps account for by far the largest share of this market segment. Notional amounts fell sharply in the first half of 2015, driven by a contraction in euro- denominated interest rate contracts (Graph 3, left-hand panel). The notional value of euro contracts declined from $167 trillion to $126 trillion between end-December 2014 and end-June 2015 (or, equivalently, from €138 trillion to €113 trillion). Trade compression to eliminate redundant contracts was the major driver of the decline. The overall volume of compressions continued to grow in the first half of 2015, mainly affecting interest rate swaps cleared through central counterparties (CCPs).3 The notional value of interest rate contracts in other currencies also declined in the first half of 2015. US dollar contracts decreased from $173 trillion to $160 trillion between end-December 2014 and end-June 2015. Yen, sterling and Swiss franc contracts also decreased, after adjustment for the impact of exchange rate movements on the reported US dollar positions of interest rate derivatives denominated in those currencies. The gross market value of interest rate derivatives decreased from $15.6 trillion at end- December 2014 to $11.1 trillion at end-June