Key Trends in the Size and Composition of OTC Derivatives Markets

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This paper analyzes recent trends in the size and composition of over-the-counter (OTC) derivatives markets, using the latest data from the Bank for International Settlements (BIS) and ISDA.

According to the BIS, OTC derivatives notional outstanding decreased during the second half of 2018 compared with the first half of 2018, driven by a decline in both US dollar- and euro- denominated interest rate derivatives (IRD) contracts. However, notional outstanding at year-end 2018 was higher compared with year-end 2017.

This trend in notional outstanding can also be seen in swap trading volumes in the US, as trading in US dollar- and euro-denominated IRD products declined during the second half of 2018 compared with the first half, but increased year-over-year.

BIS data shows that the gross market value of OTC derivatives contracts continued to decline in 2018. Gross credit exposure – gross market value after netting – also declined to its lowest level since 2007. Following the implementation of the margin rules for non-cleared derivatives, more and more of that gross credit exposure is collateralized.

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