OTC derivatives market activity in the first half of 2006

The volumes outstanding of over-the-counter derivatives expanded at a brisk pace in the first half of 2006. Notional amounts of all types of OTC contracts stood at $370 trillion at the end of June, 24% higher than six months before. Growth was particularly strong in the credit segment, where the notional amounts of outstanding credit default swaps (CDS) increased by 46%. Rapid growth was also recorded in other market segments. Open positions in interest rate derivatives rose by 24%, while those in FX contracts expanded by 22%. Equity and commodity contracts grew at 17% and 18%, respectively. Gross market values, which measure the cost of replacing all existing contracts and thus represent a better measure of market risk at a given point in time than notional amounts, increased by 3% to $10 trillion at the end of June 2006.

The following trends are noted in the statistical release:

• Rapid growth in credit default swaps despite an increase in multilateral terminations;
• Accelerating growth in interest rate and FX products;
• Slowing growth in commodity and equity derivatives;
• Concentration in OTC derivatives markets remained stable.

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 second half of 2006 no later than 31 May 2007.