The OTC derivatives market continues to provide essential risk management tools for all sectors of the global economy, for entities such as corporations, pension funds, investment firms, insurance companies and governments.
The industry has worked very hard, using tools such as netting, collateralization, portfolio compression and central clearing, to reduce risks in the system in accordance with G20 goals.
ISDA produces its Market Analysis to integrate market data to show the impact of these and other tools. For example, portfolio compression has significantly reduced notional amounts outstanding by 25% or more. Clearing, on the other hand, has the opposite effect and “artificially” increases notional outstanding. In addition, notional amounts, which are commonly used to describe the size of the market, are inappropriate for risk measurement purposes. Gross market value and gross credit exposure (which reflects netting) are far better measures of risk.
The publication of the Market Analysis corresponds with the release of the Bank for International Settlement’s (BIS) semi-annual statistical release. The BIS’s most recent release covered the period ending December 31, 2012.
The Market Analysis draws on information sources including LCH.Clearnet’s SwapClear, TriOptima, the DTCC Trade Information Warehouse, Markit, ICE, CME, ISDA’s 2012 Margin Survey and other clearinghouses and trade vendors.
Links to data sources are at the end of this paper. ISDA welcomes suggestions from readers regarding additional improvements to the Market Analysis.
Documents (1) for OTC Derivatives Market Analysis Year-End 2012
Latest
Recognition of Cross-product Netting is Critical
US regulators are in the process of making important changes to the regulatory capital framework by proposing modifications to the enhanced supplementary leverage ratio, which should help stop it from acting as a non-risk-sensitive constraint on bank capacity – a...
ISDA, GFXD Response to FCA on SI Regime
On September 10, ISDA and the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association responded to the Financial Conduct Authority's (FCA) consultation paper CP25/20 on the systematic internalizer (SI) regime for derivatives and bonds. ISDA and the...
ISDA, IIF Response to PRA on Market Risk Framework
On September 12, ISDA and the Institute of International Finance (IIF) submitted a joint response to the Prudential Regulation Authority’s (PRA) consultation on adjustments to the market risk capital framework (CP 17/25). ISDA and the IIF strongly believe the market...
ISDA Response on Clearing Costs
On September 8, ISDA responded to consultation by the European Securities and Markets Authority (ESMA) on a draft regulatory technical standard on clearing fees and associated costs (article 7c(4) of the European Market Infrastructure Regulation (EMIR)). In the response, ISDA...