EU derivatives market valued at €660 trillion

Steven Maijoor says EMIR clearing obligation is working as data shows derivatives clearing rates are increasing significantly.

The derivatives market in the European Union has been valued at €660 trillion, with interest rate derivatives dominating the market.

A report based on data submitted under the European Markets and Infrastructure Regulation (EMIR) revealed that as of 31 December 2017, the EU derivatives market amounted to €660 trillion of gross notional outstanding transactions.

Interest rate derivatives make up the bulk of that total, with around 69% outstanding, followed by currency derivatives at 12%, and all other asset classes, such as equity, credit and commodity derivatives, accounting for less than 5% of the total.

The report also found that central clearing rates for new transactions have been increasing significantly, with clearing rates for all outstanding contracts in credit derivatives reaching 27% and 58% in interest rate derivatives, including contracts concluded before the clearing obligation came into force.

“The data gathered by ESMA as part of its EMIR responsibilities provides us with an unprecedented level of detail on derivatives transactions and exposures,” said Steven Maijoor, chair or ESMA.

“In addition to allowing us to quantify the size of the market, at €660 trillion, it also allows us to observe that derivatives clearing rates are increasing significantly, showing that the EMIR clearing obligation works and is having the desired impact.”

EMIR, which was rolled out from June 2016, includes an obligation to clear standardised over-the-counter (OTC) derivatives transactions using a central counterparty.

The analysis, conducted by the European Securities and Markets Authority (ESMA), was carried out as part of a risk assessment for entity oversight of supervisory authorities.

“ESMA’s analysis of this data provides, for the first time, new information about this market which will facilitate oversight and enhance supervisory convergence, thereby contributing to orderly markets and financial stability in the EU,” Maijoor concluded.