Euro also robust

Activity was also strong for euro denominated contracts, up by 100 percent.

Business in euro-denominated interest rate swaps expanded by 66 percent. In terms of market size, contracts denominated in euros remained larger than those in dollars — $461 billion vs. $347 billion.

After decreasing between April 1995 and April 2001, activity in yen-denominated interest rate swaps expanded by 119 percent, to $35 billion. According to the BIS, the growth may reflect the signs of economic recovery and the associated changes in the outlook for interest rates.

Activity in pounddenominated interest rate swaps was also up by 157 percent, to $59 billion. Turnover in foreign exchange derivatives — or currency options — was up by 109 percent, to $140 billion. A currency option provides a trader with protection against adverse movements in foreign exchange rates. The share of this segment of the OTC derivatives market remained around 12 percent. Activity was boosted by contracts involving the U.S. dollar (up by 104 percent, to $110 billion), especially the
dollar/euro and the dollar/yen pairs (up by 124 percent and 58 percent, respectively). Turnover also increased for other euro-denominated contracts, by 130 percent, to $23 billion.

Looking at the counterparty breakdown, turnover with other financial institutions rose to 43 percent of global OTC derivatives turnover, up from 29 percent in April 2004.