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OTC derivatives: about $850 trillion notional (2025)
BIS, mid-2025· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
Derivatives negotiated privately between two parties, usually a bank and a client, rather than traded on an exchange.
See it on the Money & Finance map →How it works
OTC ('over the counter') contracts include interest-rate swaps, currency forwards and swaps, credit default swaps and custom options. The BIS counted about $846 trillion of notional value at end-June 2025: about $666 trillion in interest-rate contracts, $155 trillion in currency contracts and $11 trillion in credit derivatives. Notional only sizes the payments; gross market value, roughly what would change hands if all contracts closed, was $21.8 trillion. A property owner's swap with its lender is an OTC derivative.
Why it matters
They let banks, companies and borrowers hedge rates and currencies cheaply, but their size and links among a few dealers can spread a crisis, as in 2008. Individuals use listed futures and options instead.
Facts, rules and data
BIS semiannual OTC derivatives statistics, swap data repository reports required since Dodd–Frank, and ISDA market analyses.
Debates and risks
How much real risk remains after netting and collateral, and how concentrated it is among a handful of large dealers, is hard to measure.
Connections (4)
▸OTC derivatives: about $850 trillion notional (2025) are dominated by Interest-rate swaps: trading floating payments for fixedFact, law or data
The connection
Of about $846 trillion in OTC notional value, roughly $666 trillion, nearly four-fifths, is interest-rate contracts, mostly swaps. Banks, companies, governments and property borrowers use them to turn floating rates into fixed, or the reverse. Every floating-rate CRE loan hedged with a swap adds to this total.
When and why
Worldwide, centered on London and New York dealers; BIS data for end-June 2025.
How we know
BIS semiannual OTC derivatives statistics and ISDA's analysis of the same data.
Debates and risks
Notional overstates risk; the money truly at stake after netting and collateral is far smaller and hard to pin down.
▸OTC derivatives: about $850 trillion notional (2025) are papered under the ISDA Master Agreement: the standard swap contractFact, law or data
The connection
Private derivatives need a contract that works in every country. Most are signed under the ISDA Master Agreement: one master form, a negotiated Schedule, a short confirmation per trade, and often a collateral annex. Its close-out netting means that if one side defaults, all trades are netted into one payment.
When and why
Published in 1987 by ISDA, then called the International Swap Dealers Association; the 1992 and 2002 versions are now standard.
How we know
ISDA's published forms, legal opinions on netting in dozens of countries, and bankruptcy-law safe harbors for derivatives.
Debates and risks
How to value trades fairly at close-out in a crisis, as after Lehman's 2008 collapse, is still argued in court.
▸AIG and credit default swaps exposed hidden risk in OTC derivatives: about $850 trillion notional (2025)Fact, law or data
The connection
AIG sold credit default swaps, an OTC product, on hundreds of billions of dollars of mortgage-linked bonds. Because these trades were private and lightly regulated, few knew how large AIG's exposure was. When AIG was downgraded, contractual collateral calls nearly broke it, threatening the banks that had bought its protection.
When and why
AIG Financial Products, run largely from London, sold most of its protection on mortgage-backed CDOs in 2004–06; the rescue began September 16, 2008.
How we know
The Financial Crisis Inquiry Commission report (2011) and Congressional Oversight Panel findings documented the trades and collateral calls.
Debates and risks
Whether better transparency alone would have prevented the damage, or the risk would simply have moved elsewhere, is debated.
▸OTC derivatives: about $850 trillion notional (2025) were pushed by Dodd–Frank into Clearing houses: DTCC, the Options Clearing Corp. and CME ClearingFact, law or data
The connection
In 2009 the G20 agreed that standard OTC derivatives should be centrally cleared. Dodd–Frank (2010) required it in the US: a clearing house becomes buyer to every seller, collects margin daily and absorbs a member's default. Most interest-rate swaps now clear through LCH or CME Clearing; uncleared swaps must post margin.
When and why
US clearing mandates began in 2013 under the CFTC; Europe followed under EMIR, and margin rules for uncleared swaps phased in from 2016 to 2022.
How we know
CFTC clearing rules, BIS data showing most interest-rate derivatives now centrally cleared, and swap data repository reports.
Debates and risks
Clearing concentrates risk in a few clearing houses; whether they could survive a major member default, and who would rescue them, is debated.