Notional outstanding OTC contracts near $200 trillion

The total estimated notional amount of outstanding over-the-counter derivatives contracts stood at $197.1 trillion at the end of December, according to data released today by the Bank for International Settlements (BIS).

This represents a 16% rise in the value of OTC outstandings during the second half of 2003 versus a 3.8% rise in the notional amounts of contracts held at organised exchanges. All categories saw rises, with interest rate swaps continuing to be the largest single group of products in the OTC market, growing 18% to $111 trillion in notional amounts outstanding - 56% of the overall OTC market.

Overall, interest rate products grew 17% to $142 trillion, but forward-rate agreements, which had expanded by 17% in the first half of the year, slowed to 5% growth. Interest rate options increased by 18%.

The US dollar-denominated swap market grew by 21%, with outstanding contracts rising to $33.4 trillion. Euro-denominated swaps, previously the strongest growing sector, slowed to 10% growth in US dollar terms. They stood at $44.7 trillion at year-end. Yen swaps rose most rapidly by 29% to $17.4 trillion.

Foreign exchange options in particular showed impressive growth, with a 25% rise for the second half of the year following a 42% increase in the first half. Notional contracts involving the US dollar expanded by 30%, while those involving the euro fell by 3%. Yen options grew by 27%.

Equity linked OTC derivatives increased by 35%, compared with 21% in the previous period. The BIS noted that growth in the latter period was spread globally. Previously Europe was the main growth driver.