OTC derivatives market activity in the second half of 2008

The total notional amount of over-the-counter (OTC) derivatives contracts outstanding was $592.0 trillion at the end of December 2008, 13.4% lower than six months earlier. The decline is the first since collection of the data began in 1998. Credit market turmoil and the multilateral netting of contracts led to a contraction of 26.9% in outstanding credit default swaps (CDS). The second half of 2008 also saw the first significant decline of OTC derivatives contracts outstanding in the interest rate market (8.6%) and in the foreign exchange market (21%).

Despite the drop in amounts outstanding, movements of financial market prices in the second half of 2008 lifted gross market values 66.5%, to $33.9 trillion. Gross market values measure the cost of replacing all existing contracts and are thus a better measure of market risk than notional amounts outstanding.

The statistical release cites the following trends in the second half of 2008:

• CDS volumes continued to contract
• Commodity derivatives markets declined by two thirds
• The market value of interest rate products almost doubled

Comprehensive explanatory notes in the release define the coverage of the statistics and the terms used in presenting them.

Any queries arising from these statistics can be directed to:

Carlos Mallo tel: +41 61 280 8256; e-mail: carlos.mallo@bis.org

Jacob Gyntelberg tel: +41 61 280 8891; e-mail: jacob.gyntelberg@bis.org

The BIS expects to release the OTC derivatives statistics for the first half of 2009 no later than 30 November 2009.