BIS Quarterly Survey of FX and OTC derivative markets

Some of the detail within the Dec 2019 BIS report is of interest at OTCX.

Between 2016-19 Asset Managers increased their use of money market derivatives by 37%, as their own AUM grew. This is more than double that of the Banks growth at 18% in the same contracts, inferring, as the BIS state, a broader demand for IRD generally.

The startling data in the report also describes how there has been a "significant structural shift towards OTC markets from exchanges". Certainly words that we did not think we would read 10 years on from the Financial Crisis. The BIS attributes this to the fact that "OTC markets now offer many of the attractive features that exchanges held, while also maintaining a wider range of products and contracts... "

The BIS does not break down data on electronic transmisison of trades but we know from the recent ESMA report that 83% of OTC volume in 2018 was traded off venue i.e. probably in an unstructured, inefficient and error prone way. If the OTC marke is not migrating to exchanges and wishes to continue to grow in a regulatory compliant manner there will need to be further digitalisation of OTC trade flow.

BIS Quarterly Survey of FX and OTC derivative markets
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