derivatives market


  • Netting US: Figures below are from the second quarter of 2008 [6] • Total derivatives (notional amount): $182.2 trillion (second quarter, 2008) o Interest rate contracts:
    $145.0 trillion (86%) o Foreign exchange contracts: $18.2 trillion(10%) o 2008 Second Quarter, banks reported trading revenues of $1.6 billion • Total number of commercial banks holding derivatives: 975 Positions in the OTC derivatives market
    have increased at a rapid pace since the last triennial survey was undertaken in 2004.

  • By the end of 2007 this figure had risen to $596 trillion and in 2009 it stood at $615 trillion (source: BIS: [4]) OTC Markets are generally separated into two key segments:
    the customer market and the interdealer market.

  • That figure grew to $81 trillion by the end of March 2008 (source: BIS [2]) Over-the-counter markets Tailor-made derivatives, not traded on a futures exchange are traded on
    over-the-counter markets, also known as the OTC market.

  • Gross market values, which represent the cost of replacing all open contracts at the prevailing market prices, have increased by 74% since 2004, to $11 trillion at the end
    of June 2007.

  • The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets.

  • Notional amounts outstanding of such instruments totalled $516 trillion at the end of June 2007 (according to the Bank for International Settlements [7]), 135% higher than
    the level recorded in the 2004 survey (Graph 4).

  • The G-20’s proposals for financial markets reform all stress these points, and suggest: • higher capital standards • stronger risk management • international surveillance
    of financial firms’ operations • dynamic capital rules.

  • [4][5] The leveraged operations are said to have generated an “irrational appeal” for risk taking, and the lack of clearing obligations also appeared as very damaging for
    the balance of the market.

  • Customers almost exclusively trade through dealers because of the high search and transaction costs.

  • [1] Participants in a derivative market Participants in a derivative market can be segregated into four sets based on their trading motives.


Works Cited

[‘”ESMA data analysis values EU derivatives market at €660 trillion with central clearing increasing significantly”. Retrieved 2018-10-19.
o ^ Sasidharan (1 December 2009). Options Trading Strategies For The Bear Mkts. Tata McGraw-Hill
Education. p. 4. ISBN 978-0-07-015272-4.
o ^[bare URL PDF]
o ^ Adam Tooze, Crashed: How a Decade of Financial Crises Changed the World, London: Allen Lane and New York: Viking, 2018. ISBN 9781846140365
o ^
Financial Crisis Inquiry Commission Hearing (2010). The Role of Derivatives in the Financial Crisis – Testimony of Michael Greenberger, Law School Professor, University of Maryland School of Law (PDF).
Photo credit:’]