The European Securities and Markets Authority (ESMA), the EU’s securities regulator, said it has published its second annual statistical report analysing the European Union’s (EU) derivatives markets.  

ESMA said the report provides a “market-level view” of the EU’s derivatives markets in 2018 — revealing a total size of €735 trillion gross notional amount outstanding, an increase of 11% on 2017. 

The report also shows:

• The growth in this market is driven by an increase in interest rate derivatives and equities, which make up respectively 76% and 6% of the total.
• Following an increase in 2017, the rate of central clearing is stabilising with 63% in Q4 (61% in Q1) for interest rate derivatives, and 25% for credit derivatives.
• OTC trading continues to account for the majority of the trading in derivatives, with the share remaining globally stable throughout the year at 90%.
• Across all asset classes, exposures are highly concentrated in relatively few counterparties, particularly investment firms, credit institutions and CCPs (central counterparty clearing).
• In all markets, a few large counterparties are widely connected to other market participants, and the UK remains the dominant market for transactions within the EEA as well as with third-countries.

“This report for the first time includes an analysis of intragroup transactions, which are mainly used in equity, commodities and currency markets,” said ESMA.

“Overall, they amount to €78tn, about 11% of the market.

“The analysis shows that transactions in products subject to mandatory clearing are dominated by intragroup trading between UK and third-country legal entities in the same group, with the UK serving as an entry point to EU markets.”