The over-the-counter derivatives markets in the United Kingdom

Quarterly Bulletin 1996 Q1
Published on 01 March 1996

By the Derivatives Markets Survey Team in Markets and Systems Division.

  • Average daily over-the-counter (OTC) derivatives turnover in the United Kingdom during April 1995 was $74 billion. The main components were forward rate agreements (FRAs, 47%), interest rate swaps (25%) and currency options (18%). In addition, average daily turnover of outright foreign exchange (FX) forwards and swaps in the United Kingdom was $278 billion.
  • The United Kingdom had a 27% share of the $270 billion average daily worldwide turnover in OTC derivatives contracts and a 31% share of the $892 billion turnover in outright FX forwards and swaps. The next most active trading locations for OTC derivatives contracts were the United States (20%) and Japan (12%).
  • The notional (or face) value of outstanding OTC derivatives contracts booked in the United Kingdom was $12.1 trillion at end-March 1995. The main components were interest rate swaps (55%), FRAs (21%), interest rate options (9%), currency swaps (7%) and currency options (5%). UK reporters’ current credit exposure in OTC derivatives was $320 billion, 2.2% of their gross notional outstandings.
  • Though the results of the survey show the OTC derivatives markets to be somewhat larger than previous estimates, they are also less concentrated than has sometimes been thought and the bulk of activity is in ‘plain vanilla’—rather than exotic—products. The relationship between notional values and current credit exposure is in line with expectations.

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