Proposals for improving global derivatives market statistics

CGFS Papers  |  No 6  | 
09 July 1996
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 |  58 pages

The collection of comprehensive and reliable statistics on derivatives markets was advocated by central banks in October 1992, when the Governors of the central banks of the Group of Ten (G-10) countries released the report entitled "Recent Developments in International Interbank Relations" (the Promisel Report). This was followed by a report on "Issues of Measurement Related to Market Size and Macroprudential Risks in Derivatives Markets" (the Brockmeijer Report), which was published in February 1995. The latter report identified central banks' information requirements with regard to derivatives markets and proposed two initiatives towards addressing them: a comprehensive survey of derivatives markets conducted relatively infrequently, and a system for collecting statistics more regularly from a small number of leading international dealers.

The proposal in the Brockmeijer Report for a comprehensive survey culminated in the April 1995 Central Bank Survey Of Derivatives Market Activity. The survey was conducted by central banks and monetary authorities in 26 countries, in conjunction with the Bank for International Settlements and with the cooperation of the international financial community. The results of the survey, which are described in detail in "Central Bank Survey of Foreign Exchange and Derivatives Market Activity" (BIS, May 1996), provided information on several important aspects of these markets which had previously been unavailable. Nevertheless, in view of the rapid development of global financial markets, it must be concluded that infrequent surveys are not sufficient to provide a timely picture of many aspects of derivatives activity.

Against this background, the Euro-currency Standing Committee of the central banks of the G-10 countries (ECSC) last year asked a Working Group to develop a proposal for the more regular collection of derivatives statistics. The Group, which was chaired by Shinichi Yoshikuni of the Bank of Japan, delivered its report to the G-10 Governors in July 1996. The present report summarises the group's principal findings and recommendations. It is being released in order to finalise, with the input of market participants and supervisors, a framework for the regular collection of derivatives market data to be implemented at the end of 1997. It also recommends that central bank experts examine whether it is desirable to conduct another global survey of derivatives markets in conjunction with the next foreign exchange market survey, envisaged in 1998.

In addition, the report provides an initial discussion of possible routes to monitoring price risks and exposures in international financial markets in a broader context than derivative alone. These systemic aspects of financial markets have long been a concern of central banks, but techniques for monitoring them have not been explored in detail either theoretically or quantitatively.

After an introductory section, Part II of the report reviews the results of the April 1995 survey and assesses the implications of the survey results and participants' experiences for the regular reporting effort. Part III describes the Working Group's proposed reporting framework for derivatives activity and presents motivations for the specific components of the framework. Part IV attempts to address some of the broader issues relating to central bank monitoring of the financial system, and is intended to stimulate research and discussion on these topics in the financial community as well as in central bank and supervisory circles. Each of these sections is meant to serve as a self-contained unit.