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Mix-Ansicht- OTC derivatives market grew in H2 2001 - PuppetMaster, 27.05.2002, 08:22
OTC derivatives market grew in H2 2001
OTC derivatives market grew in H2 2001 -BIS
26.05.2002 21:00
LONDON, May 26 (Reuters) - Activity in the over-the-counter (OTC) derivatives market rose sharply in the second half of 2001, the Bank for
International Settlements said in its quarterly report.
The Basel-based central bankers' bank said the total estimated notional amount of outstanding OTC contracts was $111 trillion at year end,
up 11 percent from the end of June. The total increased by five percent during the previous half-year period.
OTC business nevertheless lagged the increase in exchange-traded contracts in 2001, the BIS said. Open positions grew by 21 percent in
the second half of the year after a growth spurt of nearly 40 percent in the first half of 2001, reversing the trend of the previous decade.
The BIS said credit default swaps had assumed increasing importance for investors following Argentina's debt default and the implosion of
U.S. energy trading giant Enron late last year. Argentina's default highlighted the need for more precise contract documentation, the bank
said.
The country's debt repudiation at the end of 2001 was seen as a clear trigger under the International Swaps and Derivatives Association
(ISDA) 1999 definition, but its $50 billion debt swap in November 2001 was the subject of legal disputes.
Bankers have subsequently narrowed the list of trigger events, abandoning obligation acceleration and repudiation/moratorium.
"In spite of these amendments, significant disagreement remains over the issue of debt restructuring. Although credit default swaps can be
traded both with and without restructuring clauses, European banks have tended to offer contracts with ISDA's 1999 terminology, while since
May 2001 U.S. dealers have been offering contracts with a narrower definition of restructuring," said the BIS report.
The BIS does not collect data on credit derivatives in its regular survey, but the 2001 Triennial Central Bank Survey showed that positions
rose to $693 billion at the end of June 2001 from $118 billion at the end of June 1998.
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