The figures show a relatively steady growth in the second half of 2007, despite the turmoil in global financial markets caused by the credit crunch. Notional amounts of all categories of OTC contracts rose by 15% to $596 trillion at the end of December, following a 24% increase in the first half of the year.Growth remained particularly strong in the credit derivatives market, where the notional amounts of outstanding credit default swaps increased by 36% to $58 trillion. The breakdown by counterparty showed that CDS contracts with insurance firms recorded a high growth rate (46%), along with contracts with banks and securities firms (44%), although the share of insurance firms was still very small (0.8% of all trades). Insurance firms sold $319 billion of the protection bought, and purchased $166 billion of the protection sold by the reporting dealers. In the second half of 2007, insurance firms showed a high growth rate (89%) as purchasers of the protection sold by the reporting dealers.Expansion in the foreign exchange segment was also relatively robust, showing a growth rate of 16% in the second half of 2007, slightly below the 21% recorded in the first half of the year. By instrument, activity in outright forwards and forex swaps and currency swaps remained relatively robust, expanding by 19% and 17%, respectively, while the growth rate of options slowed to 8% from 23% in the first half of the year. By currency, contracts with one leg denominated in US dollars, euros, Japanese yen or Swiss francs showed robust growth, ranging between 16% and 21%, while contracts in sterling slowed to 3% . By maturity, contracts with maturities over five years increased substantially by 104%, while the growth rate of contracts with shorter maturities slowed significantly.
The rapid expansion in the notional amounts and gross market values of OTC interest rate derivatives in the first half of 2007 (19% and 26% respectively) gave way to more moderate growth (13% and 18%) in the second half of the year. Notional amounts outstanding and gross market values stood at $393 trillion and $7.2 trillion respectively at the end of December 2007. By instrument, notional amounts of forward rate agreements grew faster (17%) than those of swaps (14%) or options (9%). By maturity, notional amounts with maturities over five years showed a much higher growth rate (47%) than shorter maturities. By currency, the Japanese yen and the pound sterling slowed to growth rates of 11% and 3% in the second half of the year, from 26% and 24% in the first half.
Growth in the notional amounts of OTC equity derivatives slowed markedly from 15% in the first half of 2007 to –1% in the second, the first negative growth rate since the second half of 2004 . The notional amounts of OTC equity contracts stood at $8.5 trillion at the end of December 2007. Declining notional amounts came from contracts on US (–7%), Japanese (–26%), European (–1%) and Latin American equities (–7%). This contrasted with rapidly increasing activity in derivatives on other Asian equities (107%). The breakdown by instrument indicates that the notional amounts of forwards and swaps declined by 10%, while those of options grew by 3%. Gross market values of
OTC equity contracts slightly increased by 2% to $1.1 trillion at the end of December.
The market for OTC commodity derivatives showed robust activity, with notional amounts increasing by 19% in the second half of 2007 to reach $9.0 trillion at the end of December. By risk category, gold showed a high growth rate of 40% in the second half of the year, significantly rebounding from –33% in the first half. For commodities other than gold, forwards and swaps increased by 63% to $5.6 trillion, whereas option volume declined by 25% to $2.8 trillion. Gross market values of commodity contracts in total increased by 18% to $0.8 trillion.
