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Q2 Total Gross Notional Derivatives Outstanding: $639 Trillion

Tyler Durden's picture


Earlier today, the BIS, which has been doing everything in its power today to defend the 1.27 support in the EURUSD since the market open this morning, released its H1 OTC derivatives presentation update. There was little of material note: total OTC derivatives were virtually unchanged at $639 trillion gross, representing $25 trillion in net outstanding (market value), and $3.7 trillion in gross credit exposure. Here the PhD theorists will say gross is irrelevant because Finance 101 said so, while the market practitioners will point to Lehman, counterparty risk, and less than infinite collateral to fund sudden implosions of weakest links in counterparty chains, and say that it is gross (which until a recent revision of BIS data had been documented at over $1 quadrillion) that mattered, gross which matters, and gross which will always matter until finally everything inevitably collapses in a house of missing deliverable cards. Because not even the most generous sovereigns and central banks can halt the Tsunami once there is a failure of a major OTC Interest Rate swap counterparty. And whereas Basel III had some hopes it would be able to bring down the total notional in derivative notionals slowly over the next few years with a gradual deleveraging across all financial firms, the bankers fought, and the bankers won, because the last thing the current batch of TBTFs can afford it admit there is any hope they can ever slim down. The will... but never voluntarily.


And in tabular form:

Some details from the OTC:

Total notional amounts outstanding of OTC derivatives amounted to $639 trillion at end-June 2012, down 1% from end-2011 (Graph 1, left-hand panel, and Table 1). The appreciation of the US dollar against key currencies between end-2011 and end-June 2012 contributed to the decline by reducing the US dollar value of contracts denominated in euros in particular. The overall decline was driven by interest rate contracts (–2%). Credit derivatives notional amounts also continued to decline (–6%). In contrast, foreign exchange contracts outstanding rose by 5% to $67 trillion.


Gross market values, which measure the cost of replacing existing contracts, dropped by 7% to $25 trillion (Graph 1, right-hand panel). This amounts on average to slightly less than 4% of notional amounts outstanding.


Gross credit exposures, which measure reporting dealers’ exposure after taking account of legally enforceable netting agreements, mirrored the decline in total market values, falling to $3.7 trillion, which represents 14% of the total market value of OTC derivatives. Since the end of 2008, gross credit exposures have tended to move in a narrow band of 14–16% of market values. This compares with a range of 19–24% in the mid-2000s. Gyntelberg and Vause (2012) calculate that about half of dealers’ gross credit exposures are covered by collateral.

Since gross notionals in most categories declined (boring) except for FX, here is the breakdown of what drove this rise:

Full report link


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Tue, 11/13/2012 - 11:47 | Link to Comment JPM Hater001
JPM Hater001's picture

Beeks?  Where in the hell is Beeks!!!

Tue, 11/13/2012 - 11:55 | Link to Comment redpill
redpill's picture

$639 Trillion?  Pfft.  Wake me up on Quadrillion Day.

Tue, 11/13/2012 - 12:05 | Link to Comment Winston Churchill
Winston Churchill's picture


Whats ten times the WORLD GDP.

Nothing to worry about,move along now.

Tue, 11/13/2012 - 12:10 | Link to Comment NotApplicable
NotApplicable's picture

In before the "That's just notional!" crowd.

Also, before the "What's the net, like two bucks?" crowd.

Systemic, bitchez!

Tue, 11/13/2012 - 12:13 | Link to Comment El Viejo
El Viejo's picture

<<< Hyper-Inflation

<<< Credit Risk Collapse


And the greatest risk is: Audience make your choice.

Tue, 11/13/2012 - 12:22 | Link to Comment NotApplicable
NotApplicable's picture

I choose both. (Exeter's Pyramid, FTW)

Tue, 11/13/2012 - 12:25 | Link to Comment economics9698
economics9698's picture

Someone explain this, I cannot wrap my head around $639 trillion.

Tue, 11/13/2012 - 12:42 | Link to Comment Dr. Engali
Dr. Engali's picture

Well there are approximatly 500 billion galaxies in the universe, and if each galaxy has an average of 300 billion stars that come out to 150 trillion. So in other terms about 4.26 universes worth of stars. Give or take a quarter of a universe.

Tue, 11/13/2012 - 13:02 | Link to Comment fuu
fuu's picture

500,000,000,000 x 300,000,000,000 = 150,000,000,000,000,000,000,000 which is 150 Sextillion.

Tue, 11/13/2012 - 13:11 | Link to Comment Dr. Engali
Dr. Engali's picture

You are correct sir....recalculating....2130 galaxies worth of stars.

Tue, 11/13/2012 - 13:23 | Link to Comment recidivist
recidivist's picture

Another perspective is that it is 40 times the size of the USD money supply.  For every dollar somebody holds, there is $40 worth of card houses.

Tue, 11/13/2012 - 21:41 | Link to Comment TwoShortPlanks
TwoShortPlanks's picture

OMG, what's that yellow shiny thing on the, it's headed our way, and really fast too...dear Lord, it's GOLD!

Let's see now. Assume 10% Derivative value is allowed to burn-off, that leaves about $575T. Divide that by Central Bank Gold, as well as a huge chunk of the OTHER, 70% sitting out there (Coz CBs are privately owned by the same people which have their Gold stored - for free - in vaults hidden under the BIS in Switzerland), so assume 28%+50%=78% of 5B Oz' 3.9B Oz's.

Assume a 50% Gold to OTCD ratio, that's only $73,718/Oz...........any sellers?

Wed, 11/14/2012 - 00:44 | Link to Comment Ctrl_P
Ctrl_P's picture

You gonna add the unfunded liabilities into the mix as well?

Tue, 11/13/2012 - 12:26 | Link to Comment NooooB
NooooB's picture

I vote that we stop calling them "derivatives", and start calling them "pieces of eight". Who's with me?!! YARRGGHH! Me harties!

Tue, 11/13/2012 - 13:38 | Link to Comment ebworthen
ebworthen's picture

I'll raise a wooden mug of grog to that.

Tue, 11/13/2012 - 14:45 | Link to Comment Quinvarius
Quinvarius's picture

I be callin' mine "pieces of 16"! Needed the leverage!  Arrraggh!

Tue, 11/13/2012 - 15:33 | Link to Comment R_J
R_J's picture

[Edwin Vieira Jr.] Pieces of Eight : The Monetary Powers and Disabilities of the United States Constitution

Tue, 11/13/2012 - 12:48 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The future holds something inbetween, but let's be simple and examine these two scenarios and what role the Central Banks will have dictating the terms.

Hyperinflation:  This will be cause when there is a geo-political trigger, like if Israel bombs Iran or Syria (with a big attack, moreso than what is currently occuring) and Russia and China decide to step in.  Then the East will dump the assets of the West and the Fed and ECB will be forced to absorb the derivatives.  This will cause a panic and other Western institutions like the IMF and BIS will help the Fed absorb the loss.  There will be terms that will be thrust upon the Nation-States of America and Europe of interest bearing debt that will keep chains on them for a long time.

Credit Collapse:  Economics in its current form is shown to be anything but a science.  The "rational consumer theory" and other such factless based therums are thrown under a bus.  Neo-Keynesian is shown to be a sham when the Fed's policies go up in smoke and economics and finance with it is turned on its head.

Tue, 11/13/2012 - 14:48 | Link to Comment Quinvarius
Quinvarius's picture

Credit collapse means people default and there is no demand on the money supply to pay back the debt which spawned it anymore.  Our stupid system always ends up in worthless money no matter what.  I think it becomes worthless a whole lot faster under a credit collapse than just mad printing becasue so much of it already exists as a product of debt.

Tue, 11/13/2012 - 12:04 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

We were at a quadrillion.  The banks did a decent job deleveraging while the PWG bought the toxic assets that would have failed thus causing the markets to panic. 

Bow to Ben Bernanke!  Lord of the Netherworld, Rider of Unicorns, Dreamer of Dreams.

Tue, 11/13/2012 - 12:08 | Link to Comment Winston Churchill
Winston Churchill's picture


Not so sure about that.

Didn't they change what they counted a few years back,a bit like CPI.

When it gets serious.they lie.

Tue, 11/13/2012 - 12:15 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I was about to rewrite the above when you commented. 

The "deleveraging" was done primarily by the Fed, and just because a bank which is not audited buys toxic derivatives does not make the counter party whole. 

Tue, 11/13/2012 - 12:08 | Link to Comment northman
northman's picture


Tyler can you please post something mocking Ackman and his JCP investment? Sorry for threadjacking, but he is such a hack that it makes my stomach turn.


"You know how I know it's going to work? A girl in the lunch room asked me for a pin..."



Tue, 11/13/2012 - 11:49 | Link to Comment Newsboy
Newsboy's picture

New Monetary Regime for Old.

New Monetary Regime for Old.

New Monetary Regime for Old...

Tue, 11/13/2012 - 11:50 | Link to Comment Overfed
Overfed's picture

Is there even $639 Trillion in the entire Milky Way galaxy?

Tue, 11/13/2012 - 11:54 | Link to Comment adr
adr's picture

Maybe deep inside the supermassive black hole at the galaxy center there is a giant diamond.

Lloyd Blankfein has already pledged the $639 Trillion dollars to buy it for his favorite whore.

Tue, 11/13/2012 - 12:55 | Link to Comment Overfed
Overfed's picture

Fuck buying an island, I want a private planet!

Tue, 11/13/2012 - 11:52 | Link to Comment Dealer
Dealer's picture

This should end well

Tue, 11/13/2012 - 11:52 | Link to Comment adr
adr's picture

Gross only matters when it is revenue. Then you don't need to net anything. See Amazon for example.

I still don't know how you can create a derivative value greater than the entire sum production of human history in less than ten years.

That's some quality accounting right there.


Instead of going Galt, I think I am just going to go stupid. I bet I can get more cash from the government with brain damage than I ever could trying to work for it.

Tue, 11/13/2012 - 12:14 | Link to Comment NotApplicable
NotApplicable's picture

The key, as I see it, is to be stupid enough to profit, while ensuring there are still even stupider people to pass the costs off to.

Thing is, I've watched this game a time or two. It never ends well.

Tue, 11/13/2012 - 12:08 | Link to Comment falak pema
falak pema's picture

How many institutions are involved and what % is controlled by the TBTF banks? 

these are all electronic money bets OTC and if all the banks were nationalised, in the case of a mega crisis, like 2008 when they were ALL defacto under TARP type control, how could an economic CZAR named by central banks resolve this issue; THIS TIME ROUND WITHOUT INTERFERENCE BY THE GS SQUID SHILLS LIKE PAULSON?

I assume that we stay in CB dictat hegemony but this time reporting to State Czar not to the oligarchy PDs; netting out these balances by negotiation/decree and telling the OTC players  : "fukk you and drink your cup to the dregs." would be his role with congress/parliamentary backing to reign in and break down these banks to their Glass-Steagall components. Clean out the investment banking crap via enforced debt jubilees  to save the  retail banking and pension funds vehicles. 

This money is not money; this debt is not debt, and these institutions are not institutions that deserve to survive per se.

This scenario assumes the executive, legislature and judiciary as the guts to face the Oligarchs and defy them in th people's interest. Fairy tale of huge proportions in the current momentum. 

So things don't like being resolved from top down but thru bottom up.

Tue, 11/13/2012 - 12:08 | Link to Comment Sweet Chicken
Sweet Chicken's picture

Fuck yeah +1

Tue, 11/13/2012 - 12:47 | Link to Comment butchee
butchee's picture

Bottom's up to that....  A sante!

Tue, 11/13/2012 - 13:04 | Link to Comment oldman
oldman's picture



I don't know how anyone with an ounce of humanity in their bones could possibly disagree with the above; it is all that an honest person can say!

You have an sense of simplicity and equity that is more than elegant.

Thanks               om

Tue, 11/13/2012 - 13:18 | Link to Comment slackrabbit
slackrabbit's picture

it would be easier to rendition them using the patriot and ndaa acts........oh the irony...

Tue, 11/13/2012 - 15:50 | Link to Comment R_J
R_J's picture

Great Wordings:

Please Please, Could you/anyone please "word" this for the rest of the 99,9 %, who doesnt get...ehmm...Wordings? It would be a goodie to throw in for cristmas, though it might be a tad late...hmm!


sarc & respect




Tue, 11/13/2012 - 11:54 | Link to Comment LouisDega
LouisDega's picture

Meinge.. Thats a lot of fucking money.

Tue, 11/13/2012 - 11:56 | Link to Comment GoingLoonie
GoingLoonie's picture

Sooooooo, that is where the big salaries and bonuses came from....


The actual value of derivatives is levered over 25 times, and pay was based on this

"Levered Value."  Not reality.


Is this still a bubble?

Tue, 11/13/2012 - 15:29 | Link to Comment Mad Mad Woman
Mad Mad Woman's picture're funny.  "Is this still a bubble?"  FUCK YEA!!

When this pops it will get real ugly real quick. I wouldn't want to be a banker or a stockbroker when the shit hits the fan. TBTF's can FAIL bitchez!!

Tue, 11/13/2012 - 11:58 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

I wonder if people do realize that no country has ever defaulted on debt it borrowed from the IMF.

Yet Greece is headed for that accomplishment at high speed, and can you imagine how many credit default swaps there are on that particular few hundred billion Euros?

Can you also imagine how big a piece of that US banks have?  Which is, of course, the point.  You might net the swaps to a lower number if you take Bank 1's position vs Bank 2's position, but one of those banks will go under nonetheless.

Tue, 11/13/2012 - 12:50 | Link to Comment Matt
Matt's picture

EDIT: misread from notional vs gross. 

 There probably isn't $100 Billion in CDS on Greek debt left in existance. You see, crisis averted. Just kick the can until all the CDS on Greek debt expire, and no one has exposure. Much less expensive compared to having another Lehman event.

Tue, 11/13/2012 - 13:17 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Expire?  The swap may only expire when the debt matures and is repaid.

Nothing prevents rolling the swap into the next issuance, either.  

Remember, swap transactions generate commissions.  There are a lot of guys out there talking people into writing and buying swaps, so they can collect commissions.

Tue, 11/13/2012 - 11:57 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Well, that should be enough to get the garage painted....

Tue, 11/13/2012 - 11:58 | Link to Comment q99x2
q99x2's picture

Situation calls for the power of positive thinking. Covert all the contracts to base pi and baffle them with bullshit. It will take everyone centuries to determine if anything is wrong.

Tue, 11/13/2012 - 11:58 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

One of the most humorous statements made by anyone who thinks they know something is when Webster G Tarpley says "we need to get rid of derivatives" and then he says "we should Nationalize the Fed and print trillions of dollars at zero interest".
How about that for an oxymoron.

Tue, 11/13/2012 - 12:18 | Link to Comment NotApplicable
NotApplicable's picture

Amazing at how one can carry such a disonnect between the criminal-based reality he chronicles and his  belief system called nationalism that is the supposed cure.


Tue, 11/13/2012 - 11:59 | Link to Comment Dr. Engali
Dr. Engali's picture

The concentrated position in dollar contracts is good for stability...especially when the Bernank is printing the shit out of them. 

Tue, 11/13/2012 - 12:02 | Link to Comment adr
adr's picture

Space explorers are using telescopes to search for Dyson Spheres. Even though they postulate there is enough mass in our solar system to complete such a sphere at a distance of 1AU around our sun, the sphere would not be structurally sound. This has led scientists to believe that a search is more likely to find Dyson Rings, a ring formation much like those that were popularized by the video game series Halo, from Bungie Studios owned by Microsoft. The hope is that finding such a structure will prove that it is possible to fully harness the energy of a star to provide infinite energy for the inhabitants of the system. The surface of a Dyson Sphere has the possibility of providing living space for over 10 Quadrillion inhabitants.


So maybe that is where all the money went. The ultimate Krugmanian fantasy.

Tue, 11/13/2012 - 13:23 | Link to Comment slackrabbit
slackrabbit's picture

you would make larry niven proud...

Tue, 11/13/2012 - 12:03 | Link to Comment Urban Redneck
Urban Redneck's picture

I wonder who was holding out any hope that Basel III had any chance of heading the inevitable off, before Timmy G's team shit canned it last Friday?

Tue, 11/13/2012 - 12:05 | Link to Comment jjsilver
jjsilver's picture

Criminals reporting on their criminal activity, which data can't be relied on for accuracy, all under the guise of legitimacy. Their whole scam is coming to an end very soon

Tue, 11/13/2012 - 12:20 | Link to Comment NotApplicable
NotApplicable's picture

Only to be replaced by a "New & Improved" scam of much larger proportions.

Bet on it.

Tue, 11/13/2012 - 12:09 | Link to Comment q99x2
q99x2's picture

CNBC is issuing infantile headlines and what I'm wondering is if this is actually in a CIA propaganda manual somewhere? It is worded in a mother-child relationship and seems to be intentional usage as if at the opposite end of the synaptic connections lies a nueral structure that is ominipresent and powerful that is saying we are telling how it is and you will not be able to circumvent what we tell you. I think CNBC has been compromised by Satan.

Tue, 11/13/2012 - 12:21 | Link to Comment NotApplicable
NotApplicable's picture

"Compromised" implies a past that never existed.

Tue, 11/13/2012 - 12:20 | Link to Comment youngman
youngman's picture

We ...the little guys know two things...

that we do not know who owns what on this...or how much

and if something bad does happen....Goldman Sachs will get their money first and all of it...

Tue, 11/13/2012 - 12:23 | Link to Comment yogibear
yogibear's picture

All they need is a portion of that to topple and it's all over. Kaboom!!! Dominoes.

The game is over when real price/value discovery occurs.

Tue, 11/13/2012 - 12:24 | Link to Comment haskelslocal
haskelslocal's picture

Who here is notionally covering my debt to Whimpy for today's hamburger?

Tue, 11/13/2012 - 13:43 | Link to Comment ebworthen
ebworthen's picture

Tuesday's child.

Tue, 11/13/2012 - 12:31 | Link to Comment WhiteNight123129
WhiteNight123129's picture

THey are not PhD theorists they are PhD terrorists.


Tue, 11/13/2012 - 13:05 | Link to Comment Tombstone
Tombstone's picture

Benny and the Boys have this thing covered with a quad printed and waiting to come to the rescue.  Love them socialists!

Tue, 11/13/2012 - 14:08 | Link to Comment swmnguy
swmnguy's picture

What Benny and the Boys are up to is Fascism.

Fascism is not Socialism.  Not advocating for either of them, but proper use of terminology does matter.

Tue, 11/13/2012 - 14:42 | Link to Comment orangegeek
orangegeek's picture

Remember MASH?

Through early morning fog I see
visions of the things to be
the pains that are withheld for me
I realize and I can see...

That suicide is painless
It brings on many changes
and I can take or leave it if I please.

I try to find a way to make
all our little joys relate
without that ever-present hate
but now I know that it's too late, and...

That suicide is painless
It brings on many changes
and I can take or leave it if I please.

The game of life is hard to play
I'm gonna lose it anyway
The losing card I'll someday lay
so this is all I have to say.

That suicide is painless
It brings on many changes
and I can take or leave it if I please.

The only way to win is cheat
And lay it down before I'm beat
and to another give my seat
for that's the only painless feat.

That suicide is painless
It brings on many changes
and I can take or leave it if I please.

The sword of time will pierce our skins
It doesn't hurt when it begins
But as it works its way on in
The pain grows it grin, but...

That suicide is painless
It brings on many changes
and I can take or leave it if I please.

A brave man once requested me
to answer questions that are key
'is it to be or not to be'
and I replied 'oh why ask me?'

'Cause suicide is painless
it brings on many changes
and I can take or leave it if I please.
...and you can do the same thing if you choose.

Tue, 11/13/2012 - 15:55 | Link to Comment R_J
R_J's picture

soo...If    E V E R Y O N E, and All just DeFULted, what the hell could they do?

Tue, 11/13/2012 - 16:18 | Link to Comment ItsDanger
ItsDanger's picture

Some of the derivatives' notional value is irrelevant.  Concentrate on counter party risk.  A one yr currency swap between Exxon & Kuwait would be irrelevant.  of course its not 100% but you get the pt.  The problem with the current situation is NO ONE knows who owns what side or where the exposure is anymore.  I would like them to explain how Lehman went bankrupt with a large derivatives book but didnt collapse the market.

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