93 Fed. Res. Bull. A1 (2007)

handle is hein.journals/fedred93 and id is 1 raw text is: May 2007

U.S. Cross-Border Derivatives Data:
A User's Guide

Stephanie E. Curcuru, of the Board's Division of
International Finance, prepared this article. Jonas J.
Robison provided research assistance.
The global derivatives market has grown rapidly in
the past decade. By one measure of market size-the
notional value, which is used to determine the pay-
ments made on a derivatives contract the deriva-
tives market expanded from $87 trillion in June 1998
to $454 trillion in June 2006 (figure 1). 1 Measured by
the price at which a derivatives contract can be
purchased in a current transaction, or the market
value, the derivatives market grew from $3 trillion in
June 1998 to $10 trillion as of June 2006.
Available data suggest that cross-border deriva-
tives deals-in which a resident of one country enters
into a contract with a resident of another country-
make up a substantial share of derivatives transac-
tions.2 Recognizing this fact, the International Mon-
etary Fund (IMF) has recommended that its member
countries include cross-border derivatives in their
reports on external-sector finances.3 Many countries
with financial services firms active in the derivatives
market have included derivatives in these reports
since the mid-1990s. The United States, however, has
to date published very little information on cross-
1. The notional value of a derivative is specified in the contract and
serves as one basis for computing the payments made on the contract.
For example, for a contract known as a foreign exchange forward, in
which two parties agree to exchange an amount of currency at a future
date, the notional value is the amount of currency to be exchanged.
2. For example, data for the United Kingdom indicate that cross-
border derivatives with a positive market value to the domestic
counterparty totaled $1.8 trillion in that country at the end of 2005.
Refer to Office of National Statistics (2006), United Kingdom Balance
of Payments: The Pink Book 2006 (New York: Palgrave Macmillan).
Data for other countries are available in the Balance of Payments
Statistics Yearbook, published annually by the International Monetary
3. In 1993 the IMF recommended including derivatives as a line
item under the reporting category of portfolio investment; in 1998 it
further recommended that member countries report such data as a
separate reporting category financial derivatives. Refer to Interna-
tional Monetary Fund (1993), IMF Balance of Payments Manual, 5th
ed. (Washington: IMF); and International Monetary Fund (1998),
Financial Derivatives, paper prepared for the Eleventh Meeting of
the IMF Committee on Balance of Payments Statistics, held at the
International Monetary Fund, Washington, Oct. 21 23, www.imf org/

1. Gross market value and notional value of global
derivatives outstanding, 1998 2006

Triioons of U.S. doll

Gross market value

I      I         I  I                2 0
1998           2000            2002

Trillions of U S dollars
Notional value

I  20    0 I 0
2004  2006

NOTE: The data are semiannual and extend through June 2006. Gross
market value is the sum of the total gross positive market value of contracts
with all counterparties and the absolute value of the total gross negative
market value of contracts with nonreporting counterparties. The term gross
indicates that for multiple contracts with the same counterparty, contracts
with positive market values and contracts with negative market values are not
netted. For an explanation of notional value, refer to text note 1. To adjust for
double counting, the notional values of contracts with reporting counter-
parties are divided by 2.
SOURCE: Bank for International Settlements.
border derivatives because of the limited availability
of data.4 As a result, U.S. reports on cross-border
financial flows and holdings currently exclude the
bulk of transactions and positions in cross-border
To address these gaps in data and reporting, the
U.S. Department of the Treasury, the Federal Reserve
Bank of New       York, and the Federal Reserve Board
began collecting data on U.S. cross-border transac-
tions and positions in derivatives in March 2005.
They collect the data through the Treasury Interna-
tional Capital (TIC) reporting system, which for
many years has collected similar data for securities
such as stocks and bonds.5 Because existing TIC
4. Some cross-border transactions in exchange-traded futures are
included in the quarterly U.S. balance of payments data, table 8a, line
B18 (Commercial liabilities; Advance receipts and other liabilities),
available at www.bea.gov/intemational.
5. The TIC reporting system collects information on cross-border
transactions in, and holdings of, portfolio securities and on other
claims and liabilities, including deposits. Reports are filed by banks

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