A total of 74 million open transactions amounting to a gross notional outstanding of around €660 trillion were reported in the European derivatives market at the end of 2017. This data is contained in the first annual statistical report on the European Union’s (EU) derivatives markets, published today by the European Securities and Markets Authority (ESMA). The report, based on data submitted by trade repositories under the European Markets and Infrastructure Regulation (EMIR), provides the first comprehensive market-level view of the EU’s derivatives markets which, at 31 December 2017, amounted to €660 trillion of gross notional outstanding transactions.

Other findings from the report include:

• over the counter deals accounted for 86 per cent of the total;
• exchange traded derivatives accounted for 14 per cent;
• interest rate derivatives dominate the market, with 69 per cent of the total amount outstanding, in notional terms;
• currency derivatives are at 12 per cent; and
• all other asset classes i.e. equity, credit and commodity derivatives, account for less than 5 per cent of the total amount outstanding.

Central clearing rates rising

ESMA went on to state that the primary objective of this data analysis is to contribute to ESMA’s risk assessment, to facilitate entity oversight by supervisory authorities, both national and European, and enhance supervisory convergence.

It also found that central clearing rates for new transactions have been increasing significantly, demonstrating the effectiveness of the EMIR clearing obligation. It states: “For all outstanding contracts in Q4Q2017, central clearing rates were around 27 per cent (25 per cent in Q1Q2017) for credit derivatives and 58 per cent (40 per cent in Q1Q2017) for interest rate derivatives, including also contracts concluded before the clearing obligation came into force.”

EMIR having desired impact

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

He added: “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.”

The report includes three sections on:

• market monitoring providing an analysis of structures and trends in European derivatives markets during each reporting period, building on the indicators developed for risk monitoring;
• statistical methods dedicated to topical issues in developing and exploring derivatives data; and
• derivatives market statistics offering a full list of indicators and metrics currently monitored by ESMA.