Key Trends in the Size and Composition of OTC Derivatives Markets in the First Half of 2023

The latest data on over-the-counter (OTC) derivatives from the Bank for International Settlements (BIS) shows a rise in notional outstanding, gross market value and gross credit exposure of OTC derivatives during the first half of 2023 compared to the first half of 2022. The upswing was driven by growth in interest rate and foreign exchange (FX) derivatives amid rising interest rates for major currencies.

Global OTC derivatives notional outstanding increased by 13.1% at mid-year 2023 compared to the middle of 2022. The gross market value of OTC derivatives rose by 8.1% and gross credit exposure – gross market value after netting – grew by 10.5% over the same period.

Total mark-to-market exposure was reduced by 81.6% as a result of close-out netting. Credit exposure was further reduced by the collateral market participants posted for cleared and non-cleared transactions.

Clearing rates for both interest rate derivatives (IRD) and credit default swaps (CDS) increased over the period. Firms posted $389.0 billion of initial margin (IM) for cleared IRD and CDS transactions at all major central counterparties (CCPs) at mid-year 2023 versus $359.7 billion a year earlier.

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