ISDA 1Q15 Derivatives Survey

fragmented market SEF

ISDA 1Q15 Derivatives Survey

1Q15 ISDA SURVEY

It’s May 2015, almost 8 ½ years since the Great Credit Crisis began and ISDA did their 1Q15 survey of market participants.  With Dodd-Frank bills have been passed; procedures have been implemented and processes have changed.

RESPONDENTS

The survey includes 376 respondents. Respondents did not have to answer every question – only those questions that applied to them.  out of 376 respondents, 286 (76%) answered enough questions to make them statistically significant

TYPE OF FIRM

31%    Financial Institutions             (118)

                              22%   Non-Financial Corps               (83)

                              6%     Governments                             (23)

                              6%     Energy Companies                  (22)

                              11%    Other                                            (40)

                76%    Total                                           (286)

                           Location:                                    Europe (145) and the Americas (191)

VOLUME

In answer to how much volume a respondent executes:

  • 22.60% trade between 101 –500 contracts
  • 32.15% trade between 0 – 100 contracts
  • 36.24% trade more than 500 contracts

FRAGMENTATION

In answer to whether they were impacted by the choices of Swap Execution Facilities (SEF’s) and lack of similarity of local laws around the global

  • 69.4% said yes
  • 37.6% said no
  • 7.90% said no, the market is not fragmenting

If answered “yes” above, what impact, if any, is it having on your firm’s ability to manage risk?

  • 52.4% Negative impact
  • 4.00% Positive impact
  • 24.1% No impact

 

LIQUIDITY

Questioned as to whether the respondent experienced any changes in liquidity over the past year (i.e.: number of dealers; width & depth of bid/ask spreads; availability of certain products):        

  • 6%                       Liquidity improved
  • 22.6%                 Liquidity unchanged
  • 36.2%               Liquidity deteriorated
  • 35%                     Not sure/No opinion

 

COST OF HEDGING

To the question have hedging costs changed over the past year, ISDA received replies as follows:

  • 12%                   Costs increased substantially
  • 41%                   Increased a little
  • 28%                    Not sure/No opinion
  • 3.5%                   Decreased a little
  • .30%.                  Decreased  substantially 

Has the number of derivatives dealers willing to offer your firms derivatives prices changed over the past year?

  • 91.61%                  No change in dealers (30.54%)
  • 34.43%                  Fewer dealers (34.43%)
  • 26.64%                  Not sure/no opinion (26.64%)

LIQUIDITY

If you believe that liquidity has deteriorated, then what impact, if any, is it having on your ability to manage risk?

  •  64.8%                 Negative impact
  • 34.33%                No impact/No opinion
  • .82%                      Positive impact

DERIVATIVES USAGE, RISK MANAGEMENT & YOUR ENTITY

How important are derivatives of your risk management strategy?

  • 53.9%                  Very important
  • 35.53%                  Important
  • 10.18%                   No opinion / Not important

In what ways are derivatives important to your firm’s business and investment decision-making? (Check all that apply)

  • 66.7%            Manage exposures to improve pricing, operating expenses & returns
  • 41.74%            Hedge exposures in international markets to maintain enhance our competitiveness
  • 37.84%           Reduce financing costs & managing the cost of capital to invest in the business
  • 27.63%           Hedging risks of new activities and investments can invest for growth

Do you expect the use of derivatives will increase, decrease or stay the same in the 2Q15?

  • 16.31%                  Think usage increase
  • 77.34%               Stay the same/No opinion/Not sure
  • 6.34%                    Think usage decreases

The was the wisdom of the ISA respondents. I look forward to hearing the FIA’s SEF Trackers. SEFs have been creating a bit of execution fragmentation, making it difficult to gain any traction. But more on that in another blog

 

TAGS: Asset ManagersbanksCost of Derivatives ReformISDA 1Q15 end-user survey

 

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