# Isda AGM: trillions in derivatives torn up since June

Isda said trading in interest rate derivatives "remains solid", but portfolio compression efforts meant notional outstanding had fallen to $403.1 trillion by the end of 2008, down from$464.7 trillion at the end of June. Credit default swaps saw a similar decline, with notional outstanding falling from $54.6 trillion to$38.6 trillion by the end of last year. Equity derivatives, a smaller market, fell from $11.9 trillion to$8.7 trillion outstanding.

Isda estimated that, at the end of 2008, derivatives holders had a net total credit exposure of \$2.7 trillion.

The latest figures represent success for the efforts of Isda and other market participants to reduce notional outstandings by tearing up offsetting trades. The second half of 2008 saw interest rate outstanding, by far the largest market, fall for the first time. Outstanding CDS notional continued to fall, after dropping in the first half of 2008 for the first time in the market's history.

Isda's changes to CDS contracts, which came into force earlier this month, are expected to increase tear-up activity further in the CDS market.

Robert Pickel, Isda's chief executive, commented: "In the past, the credit derivatives business has always been about more, more, more, but this year it is a more nuanced story, which is a combination of continued growth and efforts to deal with outstanding trades through tear-up processes. In the equity space, products tend to be shorter dated. While there is new activity, it is not necessarily sufficient to replace some of the run-off activity."

Eraj Shirvani, Isda chairman and head of fixed income for Europe, the Middle East and Africa at Credit Suisse, added: "The rate of growth in the CDS market was so astounding for so many years. We have seen this drop, but it is still a growing market. When you look at the central clearing initiatives we have in place, we could have 85% of the CDS market centrally cleared. That will give us a solid base to grow from."

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