OTC derivatives market activity in the second half of 2005

The volume of over-the-counter OTC derivatives contracts outstanding continued to rise in the final half of 2005, albeit at a slowing pace. Notional amounts of all types of OTC contracts excluding credit derivatives stood at $285 trillion at the end of December, 5% higher than six months before. The growth in notional amounts was particularly strong in contracts on commodities (23%) and equities (11%), and more moderate in the much larger interest rate (5%) and foreign exchange (2%) segments of the market.

Gross market values, which measure the cost of replacing all contracts and thus represent a better measure of risk at a given point in time than notional amounts, declined by 12% to $9 trillion. This was mainly due to a rebound in long-term interest rates, which reduced the replacement costs of interest rate swaps.

The following trends are noted in the statistical release:

• Rapid growth in commodity and equity contracts
• Slowing growth in interest rate products
• Subdued activity in FX derivatives
• Less rapid growth in credit default swaps
• Concentration increases in smaller market segments

Comprehensive explanatory notes are included in the statistical release, defining the coverage of and terms used to present the statistics.

Any queries arising from these statistics can be directed to:

Paola Gallardo tel: +41 61 280 8445, e-mail: paola.gallardo@bis.org

Christian Upper tel: +41 61 280 8416, e-mail: christian.upper@bis.org

The BIS expects to release the OTC derivatives statistics for the first half of 2006 no later than 30 November 2006.