The latest data from the Bank for International Settlements (BIS) over-the-counter (OTC) derivatives statistics shows a modest increase in notional outstanding during the second half of 2024 compared to the same period in 2023. Notional outstanding for interest rate, foreign exchange (FX), equity and commodity derivatives all rose year-on-year.

As major central banks shifted from a tightening to a more neutral or easing stance, interest rate volatility declined. This typically reduces the mark-to-market value of outstanding derivatives positions, leading to a drop in the gross market value of interest rate derivatives (IRD) compared to the prior tightening period. Similarly, gross credit exposure declined during this period.

By year-end 2024, the notional outstanding of global OTC derivatives rose by 4.9% compared to year-end 2023. In contrast, the gross market value of OTC derivatives contracts fell by 2.8%, while gross credit exposure, which represents the gross market value after netting, fell by 2.8% over the same period.

Total mark-to-market exposure dropped by 83.2% due to close-out netting. Credit exposure was further reduced by the collateral market participants posted for cleared and noncleared derivatives transactions.

Market participants posted $389.8 billion of required initial margin (IM) for cleared IRD and credit default swaps (CDS) transactions at all major central counterparties (CCPs) at the end of 2024 from $392.2 billion a year earlier. The leading derivatives market participants also collected $1.5 trillion of IM and variation margin (VM) for non-cleared derivatives exposures, up by 6.4%.

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