The European Securities and Markets Authority the EU’s securities regulator, published on 9th of December its second Annual Statistical Report analysing the European Union’s derivatives markets. The Report, based on data submitted under the European Markets and Infrastructure Regulation, provides a comprehensive market-level view of the EU’s derivatives markets in 2018, which had a total size of €735tn gross notional amount outstanding, an increase of 11% on 2017.
The report for the first time includes an analysis of intragroup transactions, which are mainly used in equity, commodities and currency markets. Overall, they amount to €78tn, about 11% of the market. The analysis shows that transactions in products subject to mandatory clearing are dominated by intragroup trading between UK and third-country legal entities in the same group, with the UK serving as an entry point to EU markets.
As shown in the report, the EU derivatives market at the end of 2018 had EUR 735tn in total notional amount outstanding in 66mn open trades. Investment firms, credit institutions and central counterparties (CCPs) held over 85% of the notional amount. About 10% of total notional amount was between counterparties in the same group (EUR 78tn). The market continued to be dominated by interest rate derivatives (IRDs) at 76% of notional amount. About 15% of the notional amount was in currency, with another 6% in equity, credit and commodities. Over-the-counter (OTC) contracts accounted for 90% of outstanding notional amount in 4Q18 with the remainder in exchange traded derivatives (ETDs).
However, 7% of the total notional amount was in OTC contracts executed on trading venues with characteristics comparable to ETD. For IRDs 63% of the outstanding notional amount was centrally cleared, with 25% cleared for credit derivatives (CDs). The UK remained at the centre of derivative trading in Europe and with third countries.
Key trends in European derivatives markets in 2018 included: growth in the total notional amount from EUR 665tn in 1Q18 to EUR 735tn by 4Q18. Central clearing rates grew for IRDs outstanding from 61% to 63% and ended 2018 broadly unchanged for CDs at 25%. Rates of clearing for recently executed contracts were higher (at around 80% for IRDs and 50% for CDs). The proportion of ETD contracts over all assets was stable at around 10% through the year. However, OTC contracts executed on trading venues grew strongly for currencies, IRDs and CDs, and over all asset classes grew from 3% to 7% of notional amount. Interconnectedness tended to decrease slightly but remained high in all asset classes.
For further information: ESMA – Annual Statistical Report