Over-the-counter derivatives suffered less in the second half of 2008 than exchange-traded products
Over-the-counter derivatives suffered less in the second half
of 2008 than exchange-traded products, according to a report
published by International Financial Services London.
The report said worldwide there had been a 13% fall in the
notional value of OTC derivatives from $684tr in June 2008 to
$592tr at year end.
The notional value of exchange-traded products fell 29% in
the same period – despite the counterparty risk
concerns of OTC contracts that came to the fore last year.
IFSL’s report, called Derivatives 2009, said
exchange-traded turnover fell 46% in the 12 months to the first
quarter of 2009. Duncan McKenzie, director of economics at
IFSL, predicted year-on-year, the value of exchange turnover
could drop by 25% in 2009.
The Bank of International Settlements compiled the figures.
They show that the notional outstanding value of OTC contracts
has fallen for the first time since the BIS started producing
these statistics in 1998.
The notional value of credit default swaps fell 28% in the
second half of 2008. This was partly due to voluntary
termination of contracts.
McKenzie said that "over-the-counter derivatives may well
have reached some degree of maturity but while exchange trading
could eventually be lifted by proposed reforms, future growth
of OTC derivatives will be more dependent on opening up of new
markets including those in emerging economies."
Interest rates are still the main asset class of OTC
derivatives, accounting for 71% of global notional value.
IFSL is an independent organisation that promotes UK
financial services worldwide. n
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