Central clearing is on the rise in the over-the-counter (OTC) derivatives markets, according to the latest statistics released Thursday from the Bank for International Settlements (BIS).
One of the key reforms pursued by global policymakers in the wake of the financial crisis is a shift to central clearing in OTC derivatives markets, which is well underway in certain asset classes, the BIS says in a statement announcing OTC derivatives statistics to the end of June.
Central clearing “has made very significant inroads” into OTC interest rate derivatives markets, the BIS says. However, central clearing is “less prevalent” in other segments of OTC derivatives markets, it adds.
For example, as of the end of June, 75% of dealers’ outstanding OTC interest rate derivatives contracts involved central counterparties, the BIS reports. Yet, central counterparties were only involved with 37% of credit derivatives contracts, and it’s less than 2% for foreign exchange and equity derivatives.
Overall, 62% of the $544 trillion in notional amounts outstanding reported by dealers was centrally cleared, the BIS says.
The BIS also reports that the gross market value of OTC derivatives is up to US$20.7 trillion at mid-2016, up from US$14.5 trillion at the end of 2015.
“The market value of foreign exchange derivatives involving the yen and pound sterling more than doubled in the first half of 2016 on the back of sharp moves in the respective currencies,” the BIS says.