Given the market dislocation, it’s not too surprising that BIS is reporting a fall in volumes in its latest OTC derivatives market activity survey.
Covering the second half of 2008, BIS says that the overall OTC derivatives market recorded a decline for the first time since the bank started compiling the data in 1998. BIS says the notional amounts of all OTC contracts stood at $592 trillion at the end of December 2008, 13.4% lower than the $683.7 trillion total six months earlier. Equity and commodity derivatives suffered the biggest falls, while credit default swap volumes decreased by 26.9% and FX contracts declined by 21% to $49.8 trillion. Of this, activity in forwards and FX swaps, which account for almost half of total OTC FX derivatives in terms of notional amounts, declined by 23.1%, while currency options volumes fell 28.8%.