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
Expanding Legal Agreement Coverage in the CDM
This paper examines the recent extension of the Common Domain Model (CDM)1 to represent two of the most significant, and previously undeveloped, areas of its legal agreement model: umbrella agreements and contract amendments. Umbrella agreements are widely used to document...
ISDA Omnibus Canadian Representation Letter
On September 2, ISDA published the Omnibus Canadian Representation Letter, which combines previously published representation letters drafted to assist firms in compliance with Canadian trade reporting, business conduct, regulatory margin and clearing classification rules. The Omnibus Canadian Letter is designed...
Joint Response on Cross-margining
On August 31, ISDA and FIA submitted a letter to the US Commodity Futures and Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) on the agencies’ joint request for comment on the implementation of portfolio margining and cross-margining...
Accounting for Carbon Credits: Latest Developments
This paper updates and extends the analysis set out in ISDA’s October 2023 paper on accounting for carbon credits. While preserving the original focus on the accounting treatment of voluntary carbon credits (VCCs) and compliance carbon credits (CCCs), it expands...