Dispelling Myths: End-User Activity in OTC Derivatives

There is a perception among some commentators that only a small fraction of derivatives activity relates to hedging that benefits the ‘real economy’. This analysis challenges that assumption. Publicly available data published by the Bank for International Settlements reveals that 65% of over-the-counter interest rate derivatives market turnover involves an end user on one side and a reporting dealer on the other. These participants, comprising non- dealer financial institutions and non-financial customers, use derivatives primarily to hedge risks and reduce volatility on their balance sheets.

The remaining 35% of derivatives turnover activity relates to dealer market-making and the hedging of customer transactions – vital for market liquidity and the facilitation of client trades. Without this, end users would be unable to put on risk-reducing and cost-effective hedges, potentially leading to less hedging and more balance-sheet volatility.

Documents (1) for Dispelling Myths: End-User Activity in OTC Derivatives

Credit Derivatives Trading Activity Q2 2025

This report analyzes credit derivatives trading activity reported in Europe. The analysis shows European credit derivatives transactions based on the location of reporting venues (EU versus UK) and product type. The report also compares European-reported credit derivatives trading activity to...

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...