Sharp rise in turnover in the Norwegian derivatives market

The average daily turnover in interest rate derivatives in April 2004 was USD 5.2bn, an increase of 79.3% on April 2001. The average daily turnover in the Norwegian foreign exchange market in April 2004 was USD 14bn, an increase of 11% on April 2001. The results relate to a survey of activity in the Norwegian foreign exchange and derivatives market conducted by Norges Bank in April this year. The survey is part of a joint international project under the auspices of the Bank for International Settlements (BIS).

While Norges Bank was carrying out its survey, similar surveys were conducted in 52 other countries. Similar surveys have been carried out every three years since 1989. Norges Bank will publish an analysis of the Norwegian survey in the Economic Bulletin. The article will also contain data on outstanding contracts in the Norwegian foreign exchange and derivatives market. The BIS will present preliminary results from the outstanding contracts part of the survey in November 2004 and the final results of the survey in spring 2005.

Sharp increase in the use of interest rate derivatives

FRA turnover increased by 64.5% from April 2001 to April 2004, while FRAs as a share of monthly turnover nevertheless fell from 89.1% in 2001 to 77.5% in 2004. The reason is that turnover of interest rate swap agreements and interest rate options rose sharply during this period. Interest rate swaps as share of total turnover rose from 10.4% in April 2001 to 18.0% in April 2004, while the share of interest rate options rose from a mere 0.5% to 4.6% in the same period.

Increased forward trading, reduced spot trading and a rising krone share

Turnover in forwards, including exchange rate swaps, increased by 30.4% from April 2001 to April 2004. Turnover in spot transactions, on the other hand, fell by 15.6% from April 2001 to April 2004. The share of turnover accounted for by USD declined from 43.8% in April 2001 to 40.8% in April 2004. The share of turnover accounted for by NOK rose from 32.0% in April 2001 to 37% in April 2004. In this year's survey, EUR accounted for 13.9% of all transactions, compared with 16.7% in the previous survey in 2001. The decline in share for USD and euro in this year's survey is partly attributable to special conditions in the spot market in April.

Large increase in foreign exchange trading with non-financial customers and more short-term trading

Transactions with foreign sectors accounted for 79.4% of turnover in 2004, against 80.3% in 2001. The share of transactions with customers other than financial sector customers increased from 7.7% in 2001 to 15.4% in 2004. In April 2004, the share of contracts with maturities of less than seven days was 71.5%, compared with 56.6% in April 2001 - an increase of 15 percentage points.

More information:

Background
Charts
Tables

Link to BIS

Contacts:
Sigbjørn Wettre, tel.+47 22 31 63 02, e-mail: sigbjorn.wettre@norges-bank.no
Anders Borgersen, tel.+47 22 31 63 24, e-mail: anders-bohlin.borgersen@norges-bank.no
Olav Stensrud, tel.+47 22 31 61 32, e-mail: olav.stensrud@norges-bank.no