Happy New Year and a Derivatives Data Request

Dear Loyal Readers,

Happy New Year! 2011 is an auspicious year. As noted by some internet types, 2011 is prime, and is the sum of 11 consecutive primes (2011=157+163+167+173+179+181+191+193+197+199+211). What fun!

On a more serious note, I have a request for data that I hoped some of y’all might be able to help me with. I’m looking for a nice chart or table on the growth of the OTC derivatives market in the 1980s and 1990s. In particular, I am looking for something broken down by who was issuing the derivatives – traditional investment banks, commercial banks, etc. and perhaps broken down by type of derivative (interest-rate vs. exchange-rate swaps, etc.). I know people quote figures on this topic all the time, but I can’t think off the top of my head of a good source for such a chart. This isn’t for any kind of statistical model, so I don’t need the underlying data, just a sense of which kinds of institutions were issuing how much of which kinds of derivatives (i.e. the size of the market and the market share of commercial vs. investment banks). Anyone out there have a recommendation?

Thanks so much and happy new year!
Dan

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4 Comments

  1. Off the cuff, I would try the ISDA, the International Swaps and Derivatives Association, the global trade association overseeing OTC derivatives – they provide the template contracts, do surveys, etc. In particular, look here: http://www.isda.org/statistics/otc.html

    The ISDA market survey (http://www.isda.org/statistics/historical.html) goes back to 1987. I don’t know if you know how to read these things, but notional value, sometimes open interest, are usually designated as contracts not yet closed out. But it’s all idiosyncratic, I haven’t really looked closely at these various surveys, tables, etc.

    • Thanks!
      The ISDA is great for total market size but as far as I can tell, they don’t break it out by type of institution.

      The OCC has way better data for commercial banks, including total revenue from derivatives trading, but they don’t have anything for investment banking, and their data is only fully available from 1998 on.

      The best I’ve found so far is from a 1994 GAO report which uses company annual reports from 1992 for the 15 largest dealers – 7 commercial banks, 5 investment banks, and 3 insurance companies. That does what I need, I think, in terms of showing that both C and I banks were heavily involved in this market.

  2. Peter

     /  January 2, 2011

    their data is only fully available from 1998 on.

    Although I wouldn’t overestimate the size of the OTC market pre-2000s. Plus, OTC derivatives is too broad to capture anything – they are just any bilateral contract, often individually negotiated. That banks ‘were heavily involved in this market’ somehow implies that there is a ‘this market’, which I would strongly encourage you to be as explicit as possible about what you mean there.

    But yes, OCC is another place. At some point, FYI, ISDA ‘standardized’ OTC contracts for some financial derivatives, or at least provided legally binding templates, and my guess is that (not shockingly) this standardization allowed more OTC contract participation across those contracts that were standardized, as well as others…

    • Thanks for the warning, I’ll try to be careful – certainly the market was much tinier in the 1980s and early 1990s. But, from what I’m seeing, there was a fair amount of action in OTC interest-rate and foreign-exchange swaps in the 1980s and 1990s. Tiny compared to the tremendous growth in the late 90s and 2000s, but still pretty substantial – billions of dollars of profits on notional amounts in the tens of trillions. And something like 60% of large firms were already purchasing interest-rate swaps by 1994. So, there’s something of a market there.