LONDON, May 9 (IFR) - The volume of outstanding
over-the-counter derivatives notional fell 13% to US$483trn in
the six months ending December 2016, the lowest level for over a
decade, according to the latest semiannual survey from the Bank
for International Settlements.
The latest figure reverses a 10% increase seen in the first
half of the 2016, but cements a long-term decline from a
US$710trn peak in 2013.
Trade compression has been a significant driver behind the
decline as dealers continue to scrub down their balance sheets
by eliminating redundant contracts to address stringent capital
and leverage rules. Compression provider TriOptima eliminated
US$175trn of swaps contracts in its triReduce service in 2016.
The firm has compressed US$973trn since inception in 2003.
Notional amounts of interest rate derivatives - the largest
portion of the OTC market - fell by 14% to US$368trn over the
six-month period, with sharp declines in Swedish kronor and yen
The share of reporting dealers’ positions cleared through
central counterparty clearinghouses stood at 76% - unchanged
from six months earlier. Forward rate agreements were the most
actively cleared products with 92% going through CCPs, followed
by interest rate swaps at 81%. While clearing of interest rate
options remained small, cleared notional quadrupled in those
products over the six-month period to US$225bn from US$53bn.
Credit default swaps also witnessed sharp declines in
outstanding notional to US$9.9trn from US$11.8trn previously.
Declines were concentrated in uncleared contracts, whereas
notional outstanding for contracts cleared at CCPs remained
stable at US$4.3trn. The share of outstanding CDS cleared
through CCPs jumped from 37% at June 2016 to 44% in December -
the largest semiannual increase since CDS data were first
collected in 2010.
The gross market value of outstanding derivatives contracts
– which reflects the cost of replacing all positions at current
market prices – also declined in the second half of 2016, to
US$15trn from US$21trn. Gross credit exposures, which adjust
gross market values for legally enforceable bilateral netting
agreements, fell to US$3.3trn from US$3.7trn during the same
(Reporting by Helen Bartholomew)