The Bank for International Settlements release the OTC Derivatives Statistics for end-June 2020

On Monday 9thNovember 2020, the Bank for International Settlements (BIS) released their OTC Derivatives Statistics Report for June-end 2020, covering key data across the OTC and centrally cleared derivatives markets.

The BIS statistics are an important and unique source of data about the structure of and activity in the global financial system. Compiled in cooperation with central banks and other national authorities, the BIS statistics are designed to inform analysis of financial stability, international monetary spillovers and global liquidity.

The impact of COVID-19 during the first half of 2020, coupled with strong policy responses were prime factors for driving the significant developments within the derivatives markets. The BIS report provides links to multiple sources that further detail the market developments across the COVID-19 turmoil.

The BIS have highlighted the following key statistics within the report:

  • Gross market value (GMV)of over-the-counter (OTC) derivatives increased ~34% from USD 11.6 trillion to USD 15.5 trillion during the first half of 2020. GMV is defined as the sum of the absolute values of all outstanding derivatives contracts with either positive or negative replacement values evaluated at market prices prevailing on the reporting date. Thus, GMV gives a sense to the mark-to-market profits and losses for outstanding contracts.
  • Gross credit exposure (GCE)increased ~33% from USD 2.4 trillion at end-2019 to USD 3.2 trillion end-June 2020, the largest increase since 2009 (please see Chart 1, below). GCE is derived from GMV by netting down by counterparty-to-counterparty netting agreements, but does not include possible collateral transferred to cover these historical market moves. For lack of a better alternative, GCE gives the most accurate picture available from public sources of the profit and loss for outstanding OTC derivative contracts.
  • Central clearing rates increased slightly in the first half of 2020, particularly driven by credit default swaps (CDS). Notional amount outstanding of CDS cleared by central counterparties (CCPs) increased from 56% at end-2019 to 60% at end-June 2020, representing the largest increase since first half of 2017, when clearing rates had trended upwards following the 2009 G20 commitment to clear standardised OTC derivative contracts.

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