The International Swaps and Derivatives Association, Inc. (“ISDA”) announced the results of its Mid-Year 2009 Market Survey (the “Survey”) of privately-negotiated derivatives at its regional conference in New York City on September 15, 2009. The Survey results indicated that the notional amounts outstanding over the past six months of interest rate derivatives increased by 3% to $414.1 trillion, of equity derivatives remained flat at $8.8 trillion and of credit derivatives decreased by 19% to $31.2 trillion. Each of these products has seen a decline in notional amounts outstanding over the past year by 11%, 26% and 43%, respectively.
The Survey cautioned that the notional amounts outstanding reflected only approximate market activity, not risk. It also pointed out that, as of December 2008, according to the Bank for International Settlements, the gross market value (i.e., the cost of replacement) of all derivatives was approximately 5.7% of outstanding notional amount and the net credit exposure (i.e., after netting of exposures but before the application of any collateral) of all derivatives was approximately 0.80 percent of outstanding notional amount. Applying these percentages to the total notional amount outstanding of $454.1 trillion for the trade types covered by the Survey results in a gross mark-to-market value of $26 trillion and a net credit exposure of $3.8 trillion. The Survey results were based on responses from ISDA’s “primary membership”: 86 firms provided responses on interest rate derivatives, 77 firms provided responses on equity derivatives and 78 firms provided responses on credit derivatives.