OTC Derivatives Markets: Staging a Recovery

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22 October 2013


The global OTC derivatives market has seen a recovery in the foreign exchange and interest rate markets. However, credit, equity, and commodity markets have not performed very well in the last few years.

OTC Derivatives Markets: Staging a Recovery analyzes the recent performance of the global OTC derivatives markets to understand how they have coped both before and after the crisis, and also considers the specific performance of each asset class.

Celent’s research indicates a linear trend for nonal outstanding, which has been rising in the last decade. The December 2012 outstanding is higher than the December 2010 level, although there has been a decline since June 2011. The current performance is close to the long-term trend line, and we believe that the market has stabilized since the financial crisis. Now the next big development will be the impact of OTC derivatives regulation.

“We seem to be seeing a more realistic and sustainable performance across the various asset classes in OTC derivatives,” says Dr. Anshuman Jaswal, Senior Analyst with Celent’s Institutional Securities & Investments Group and author of the report. “We can look forward to the impending move toward SEFs, and greater central clearing, to make the market more efficient and transparent.”

We begin the report with an analysis of the performance of the OTC derivatives markets for the various asset classes in terms of the notional amounts outstanding and gross market value. This is followed by the product breakdown for each asset class to understand the relative importance of the different OTC derivatives products. After this we consider the breakdown of volumes by different types of counterparties. Finally, we look at the maturities and the currency in which the derivatives are denominated for foreign exchange, interest rate, and equity derivatives.