Notional OTC derivatives amount hits $693 trillion - BIS

    The notional amount of outstanding derivatives contracts jumped to $693 trillion by the end of June from $633 trillion at the end of 2012, but part of the rise was due to increased trading through central counterparties (CCPs), the Bank for International Settlements (BIS) said.
    When over-the-counter (OTC) derivatives trades are cleared through CCPs, the notional amounts reported to the BIS increases because one contract becomes two, said the BIS based on its semiannual survey of some 70 major derivatives dealers based in 13 countries.
    In contrast to the rise in notional amounts, the gross market value of the OTC derivatives, or the cost of replacing all contracts at market prices, fell to $20 trillion end-June from $25 trillion end-2012.
    Interest rate contracts are still the largest segment in the global OTC derivatives market, with notional amounts of $577 trillion.
    But the use of derivatives varies depending on dealers, the BIS said.
    Dealers in emerging markets tend to focus on managing foreign exchange risks with interest rate derivatives accounting for a much smaller share of their contracts compared with those dealers that are based in the largest markets and participate in the semi-annual survey.

Value of outstanding OTC derivatives falls 1% - BIS

    The total notional amount of outstanding Over-The-Counter derivatives declined 1.0 percent to $639 trillion at the end of June from the end of 2011, mainly because a rise in the value of the U.S. dollar reduced the value of euro-denominated contracts, the Bank for International Settlements (BIS) said.

    The overall decline was driven by a 2.0 percent drop in interest rate contracts, BIS said, adding that the notional amounts of credit derivatives fell by 6.0 percent.

     In contrast, BIS said the value of outstanding foreign exchange contracts rose by 5.0 percent to $67 trillion.

    Gross credit exposures, which measure the exposure of dealers reporting to the BIS, fell to $3.7 trillion after taking into account netting agreements. Gross market values, which measure the cost of replacing existing contracts, fell by 7 percent to $25 trillion.

     A detailed analysis of the recent trends in the OTC derivatives markets, which will soon be traded on exchanges, will be published in the next BIS Quarterly Review on Dec. 10.

    

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OTC infrastructure ready, but no regulatory certainty - FSB

    The private sector infrastructure necessary to trade, clear and record over-the-counter (OTC) derivative transactions is now ready but regulatory uncertainty is blocking everyone from using these new exchanges, according to the Financial Stability Board (FSB).
    The FSB’s fourth progress report on reforming OTC derivatives, which triggered fears of contagion during the global financial crises, showed that the United States, the European Union, Hong Kong and Japan have made further progress in meeting the goal of trading and clearing through central counter parties by end-2012.
    But agreeing on cross-border rules is lacking and the FSB urged regulators worldwide to identify and develop options to tackle the shortcomings to help meet the end-2012 commitment to central clearing.
    The financial crises revealed that OTC derivatives had contributed to the build-up of systemic risk and the global nature of these markets - where buyers and sellers are frequently located in different jurisdictions - makes globally consistent regulation essential.

Top OTC derivative markets set to meet deadline - FSB

    United States, Europe and Japan are on track to have all standardized over-the-counter (OTC) derivative contracts traded on exchanges and cleared through central counter parties by end-2012, meeting a deadline set by Group of 20 leaders, the Financial Stability Board said.
    The global financial crises revealed that OTC derivatives had contributed to a build-up of systemic risk, triggering fears of contagion due to the close ties between market participants and a lack of transparency of their relationships.