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Trading of OTC interest rate derivatives increases to $2.7 trillion per day in April 2016

The 2016 Triennial Central Bank Survey of foreign exchange and over-the-counter (OTC) derivatives market activity shows that US dollar-denominated instruments overtook euro-denominated instruments as the most actively traded OTC interest rate derivatives.

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Trading in OTC single currency interest rate derivatives averaged $2.7 trillion per day in April 2016. This is up from $2.3 trillion in April 2013. Interest rate swaps were the most actively traded instruments in 2016, at $1.9 trillion per day, followed by forward rate agreements at $0.7 trillion.

The turnover of euro-denominated derivatives, which have historically been the most actively traded OTC interest rate instruments, declined to $0.6 trillion per day in April 2016. In contrast, the turnover of US dollar instruments rose to $1.4 trillion. Trading also increased in many instruments denominated in emerging market currencies, although the depreciation of many of these currencies against the US dollar between 2013 and 2016 reduced the growth in turnover when measured in US dollars. Among emerging market currencies, OTC interest rate derivatives denominated in Mexican pesos were the most actively traded, with turnover more than doubling between 2013 and 2016 to $26 billion per day.

Financial institutions other than reporting dealers continued to dominate activity in OTC interest rate derivative markets. Their share of turnover rose from 59% in April 2013 to 66% in April 2016. Trading between reporting dealers fell to a historical low of 26% of global activity.

The geographical distribution of OTC interest rate derivatives trading saw the United States become the largest trading centre, surpassing the United Kingdom. The United States’ share of global activity rose from 23% to 41% between April 2013 and April 2016, driven mainly by the increased trading of US dollar instruments. Over the same period, the United Kingdom’s share fell from 50% to 39%, owing in part to the weakness of euro activity, for which the United Kingdom continued to be the largest trading centre.

Next Finance , September 5

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