Derivatives Outstanding Survey

DRAFT

Instructions for the

Central Bank Survey of Foreign
Exchange and Derivatives Market Activity

Derivatives Outstanding Survey
End-June 2007

FR 3036
OMB No. 7100-0285

This report is authorized by law [12 U.S.C. 248(a), 353-359, and 461]. Your voluntary cooperation
in submitting this report is needed to make the results comprehensive, accurate and timely. The
Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, a
collection of information unless it displays a currently valid OMB control number. The Federal
Reserve System regards the individual institution information provided by each respondent as
confidential [5 U.S.C. 552(b)(4)]. If it should be determined that any information collected on this
form must be released, other than in the aggregate in ways that will not reveal the amounts
reported by any one institution, respondents will be notified.
Public reporting burden for this collection of information is estimated to be 60 hours per response,
including time to gather and maintain data in the proper form, to review instructions and to
complete the information collection. Send comments regarding this burden estimate to: Secretary,
Board of Governors of the Federal Reserve System, 20th and C Streets, NW, Washington, DC
20551; and to the Office of Management and Budget, Paperwork Reduction Project, (7100-0285),
Washington, DC 20503.

Derivatives Outstanding Survey
June 2007
Instructions

A.

FR 3036
DRAFT

Introduction

These instructions cover the survey of amounts outstanding for derivatives held as of the last day
of business of June 2007. Separate instructions have been provided for the turnover part of the
survey.

These instructions are for the United States portion of the triennial derivatives market activity
undertaken by the central banks of the G-10 member nations. The primary objective of the FR
3036 is to obtain reasonably comprehensive and internationally consistent data on the size and
structure of global over-the-counter (OTC) financial derivatives data. In order to limit reporting
burden, no data are collected on amounts outstanding of exchange-traded derivative instruments,
given that timely and comprehensive information on these products is available from commercial
data sources. The data on derivatives outstanding are collected on a consolidated basis at endJune 2007.
The Federal Reserve System treats information provided by each respondent as confidential.
Aggregate totals will be published by the Federal Reserve Bank of New York and the Bank for
International Settlements.

B.

Coverage

1.

Reporters

Reporting dealers for the amounts outstanding part of the survey are the top tier company or
holding company for U.S.-based financial institutions that actively participate in foreign exchange
and derivatives markets and that have significant derivatives positions.

2.

Risk categories

The survey collects data on OTC derivative products according to the following broad market
classification:
•
•
•

foreign exchange and gold contracts (Tables 1 and 4)
single-currency interest rate derivatives (Tables 2 and 4)
equity, commodity, credit and "other " derivatives (Tables 3, 4, and 5).

Foreign exchange and gold contracts. These contracts include those involving the exchange of
currencies in the forward market. They cover outright forwards, foreign exchange swaps, currency
swaps (including cross-currency interest rate swaps) and currency options. Foreign exchange
contracts include all deals involving exposure to more than one currency, whether in interest rates
or exchange rates.
Gold contracts include all deals involving exposure to that commodity.
Single-currency interest rate derivatives. Interest rate contracts are contracts related to an interestbearing financial instrument whose cash flows are determined by referencing interest rates or
another interest rate contract (e.g., an option on a futures contract to purchase a Treasury bill).
Interest rate contracts include forward rate agreements, single-currency interest rate swaps and
interest rate options, including caps, floors, collars and corridors.
This category includes only those deals where all the legs are exposed to only one currency's
interest rates. Thus it excludes contracts involving the exchange of one or more foreign currencies
(e.g., cross-currency swaps and currency options) and other contracts whose predominant risk

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characteristic is foreign exchange risk and which should be reported as foreign exchange
contracts.
Equity, commodity, credit and "other" derivatives. Equity derivative contracts are contracts that
have a return, or a portion of their return, linked to the price of a particular equity or to an index of
equity prices.
Commodity contracts are contracts that have a return, or a portion of their return, linked to the
price of, or to a price index of, a commodity such as a precious metal (other than gold), petroleum,
lumber or agricultural products.
Please note that contracts that have a return or a portion of their return, linked to the price of
precious metals (other than gold) should be reported separately from other commodity-linked
contracts.
Credit derivatives are contracts in which the payout is linked primarily to some measure of the
creditworthiness of a particular reference credit. The contracts specify an exchange of payments in
which at least one of the two legs is determined by the performance of the reference credit.
Payouts can be triggered by a number of events, including a default, a rating downgrade or a
stipulated change in the credit spread of the reference asset. Typical credit derivative instruments
are credit-spread forwards and options, credit event or default swaps and total return swaps.
"Other" derivatives are any other derivative contracts, which do not involve an exposure to foreign
exchange, interest rate, equity, commodity or credit risk.

3.

Instrument types

For OTC derivatives, the following instrument breakdown is requested:
•
•
•
•

forwards
swaps
OTC options
•
sold
•
bought
other products

Forward contracts. Forward contracts are agreements for delayed delivery of financial instruments
or commodities in which the buyer agrees to purchase and the seller agrees to deliver, at a
specified future date, a specified instrument or commodity at a specified price or yield. Forward
contracts are generally not traded on organized exchanges and their contractual terms are not
standardized. Transactions where only the difference between the contracted forward outright rate
and the prevailing spot rate is settled at maturity, such as non-deliverable forwards (i.e., forwards
which do not require physical delivery of a non-convertible currency) and other contracts for
differences, should be reported.
Those forward contracts are to be reported that have been entered into by the reporting bank and
are outstanding (i.e., open contracts) at the reporting date. Contracts are outstanding (i.e., open)
until they have been cancelled by acquisition or delivery of the underlying financial instrument or
commodity or settled in cash. Such contracts can only be terminated other than by receipt of the
underlying asset, by agreement of both buyer and seller.
Swaps: Swaps are transactions in which two parties agree to exchange payment streams based
on a specified notional amount for a specified period. Foreign exchange swaps involve the
exchange of two currencies and the reverse exchange of the same currencies at a date further in
the future. Forward-starting swap contracts should be reported as swaps.
For swaps executed on a forward/forward basis, both forward parts of the transaction should be
reported separately. In contrast, in the case of foreign exchange swaps, which are concluded as
spot/forward transactions, only the unsettled forward part of the deal is to be reported.
OTC options. Option contracts convey either the right or the obligation, depending upon whether
the reporting institution is the purchaser or the writer, respectively, to buy or sell a financial
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instrument or commodity at a specified price up to a specified future date. OTC option contracts
include all option contracts not traded on an organized exchange. Swaptions (i.e., options to enter
into a swap contract) caps, floors, collars, and corridors should be reported as options. Options
such as call feature embedded in loans, securities and other on-balance-sheet assets do not fall
within the scope of this survey and are therefore not to be reported unless they are a derivative
instrument that must be treated separately under FAS 133. (FAS 133 requires the bifurcation of
derivatives that are not clearly and closely related to the host contract.)
Sold options. OTC options contracts in which the reporter has, for compensation (such as a fee or
premium), obligated itself to either purchase or sell financial instruments or commodities. Also to
be reported are data for written caps, floors and swaptions and for the written portion only of
collars and corridors.
Bought options. OTC option contracts in which the reporter has, for a fee or premium, acquired the
right to either purchase or sell financial instruments or commodities. Also report data for purchased
caps, floors and swaptions and for the purchased portion only of collars and corridors.
Other products. Other derivative products are instruments where decomposition into individual
plain vanilla instruments such as forwards, swaps or options is impractical or impossible.
Examples of "other" products are swaps with underlying notional principal in one currency and
fixed or floating interest rate payments based on interest rates in currencies other than the notional
(differential swaps or diff swaps) and instruments with leveraged payoffs and/or those whose
notional principal varies as a function of interest rates, such as swaps based on LIBOR squared or
index amortizing rate swaps.
Further instrument definitions and reporting categorizations are provided in Section G below.

4.

Types of data requested

To gauge the size of the foreign exchange and OTC derivatives markets, this survey collects data
on outstandings in notional amounts and gross market values, ‘
Notional amounts outstanding are defined as the gross notional value of all deals concluded and
not yet settled at the reporting date. The data should in principle be reported on a consolidated
basis i.e., inter-company deals should be excluded. Refer to Section 5 below, “Reporting
basis”.
For contracts with variable notional amounts, the basis for reporting should be the
notional amounts at the time of reporting.
The notional amount or par value to be reported for a derivative contract with a multiplier
component is the contract's effective notional amount or par value. For example, a swap contract
with a stated notional amount of $1,000,000 whose terms called for quarterly settlement of the
difference between 5% and LIBOR multiplied by ten has an effective notional amount of
$10,000,000.
No netting of contracts is permitted. Therefore, the following should not be netted: (1) obligations
of the reporting bank to purchase from third parties against the bank's obligations to sell to third
parties, (2) written options against purchased options, and (3) contracts subject to bilateral netting
agreements.
The notional value to be reported is that of the contract itself and not the par value of financial
instruments intended to be delivered under forward contracts.
Swaps. The notional amount of a swap is the underlying principal amount upon which the
exchange of interest, foreign exchange or other income or expense is based.
Equity and commodity-linked contracts. The contract amount to be reported for an equity or
commodity contract is the quantity, e.g., number of units, of the commodity or equity product
contracted for purchase or sale multiplied by the contract price of a unit.
The notional amount to be reported for commodity contracts with multiple exchanges of principal is
the contractual amount multiplied by the number of remaining exchanges of principal in the
contract.

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Credit derivatives. The contract amount to be reported for credit derivatives is the notional value of
the relevant reference credit. Credit linked notes are cash securities and should therefore be
excluded from this survey.
Gross fair values are defined as the sums of the absolute values of all open contracts with either
positive or negative fair value on the as of date. Fair values are the amounts at which a contract
could be exchanged in a current transaction between willing parties, other than in a forced or
liquidation sale. If a quoted price is available for a contract, the number of trading units should be
multiplied by that market price. If a quoted market price is not available, the reporting institution
should provide its best estimate of market value based on the quoted price of a similar contract or
on valuation techniques such as discounted cash flows.
Gross fair value is defined as the value of all open contracts before counterparty or any other
netting. Thus, the gross positive market value of a firm's outstanding contracts is the sum of all
positive fair values of a firm’s contracts. Similarly, the gross negative fair value is the sum of all
negative values of a firm’s contracts.
The term gross is used to indicate that contracts with positive and negative fair values with the
same counterparty should not be netted. Nor should the sums of positive and negative contract
values be set off against each other within a risk category such as foreign exchange, interest rate,
equity, commodity, credit and "other".
Unlike forwards or swaps, OTC options have a fair value at initiation, which is equal to the
premium paid to the writer of the option. Throughout their life option contracts can only have a
positive fair value for the buyer and a negative fair value for the seller. If a quoted market price is
available for a contract, the fair value to be reported for that contract is the product of the number
of trading units of the contract multiplied by that market price. If a quoted market price is not
available, the fair value of an outstanding option contract at the time of reporting can be
determined on the basis of secondary market prices for options with the same strike prices and
remaining maturities as the option being valued, or by using option pricing models. In an option
pricing model, current quotes of forward prices for the underlying (spot prices for American
options) and the implied volatility and market interest rate relevant to the option's maturity would
normally be used to calculate the "market" values.
Gross positive fair value is the sum of the current fair values of all purchased options, and gross
negative fair value would be the sum of the values of sold options. Options sold and purchased
with the same counterparty should not be netted against each other, nor should offsetting bought
and sold options on the same underlying.
All data on amounts outstanding should be reported as of end-June 2007.

5.

Reporting basis

The reporting of amounts outstanding data should be on a consolidated basis by the top-tier
company or holding company.
Data from all branches and (majority-owned) subsidiaries
worldwide must be added together and reported. Deals between branches and subsidiaries of the
reporter must be eliminated.
Please use the consolidation guidelines indicated in the latest
version of the FR Y-9C, or, for nonbank dealers, on the same basis as described in generally
accepted accounting principles (GAAP). Inter-company transactions should be excluded, even if
they relate to transactions with affiliates which are unconsolidated, based on ownership criteria,
but are in effect controlled by the reporting institution.

6.

Currency of reporting and currency conversion

Amounts outstanding are to be reported in US dollar equivalents. Contracts that are denominated
in non-dollar currencies should be converted into US dollars by using the end-of-period exchange
rates as of the reporting date. For practical reasons, reporting institutions may also use their
internal (bookkeeping) exchange rates to convert amounts outstanding booked in non-dollar
currencies, as long as these exchange rates correspond closely to market rates.

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7.

FR 3036
DRAFT

Rounding

All data entered on the report form should be rounded to the nearest million US dollars (do not use
decimals).
8.

Reporting deadline

Data should be submitted to the Federal Reserve Bank of New York by August 31, 2007.

C.

Counterparties

Contracts are reported by counterparty as follows: reporting dealers, other financial institutions and
non-financial customers.
"Reporting dealers" are those institutions whose head office is located in the Group of Ten
countries that participate in the semi-annual OTC derivatives market statistics. In order to allow
the accurate elimination of double counting of inter-reporter transactions, reporting institutions
should identify transactions with "reporting dealers" to the best of their ability. Two separate lists of
"reporting dealers" for the turnover and amounts outstanding parts of the survey are provided.
“Reporting dealers” will mainly be commercial and investment banks and securities houses,
including their branches and subsidiaries and other entities which are active dealers worldwide.

"Other financial institutions" covers all categories of financial institutions not classified as "reporting
dealers". It will include all non-reporting financial institutions, such as commercial banks,
investment banks and securities houses, mutual funds, pension funds, hedge funds, currency
funds, money market funds, thrifts, leasing companies, insurance companies, and financial
subsidiaries of non-financial companies
A "non-financial customer" is any counterparty other than those described above, in practice
mainly corporate firms and governments.

D.

Currency and other risk factor breakdowns

For amounts outstanding of foreign exchange and interest rate contracts the following currency
breakdown is requested:
USD, EUR, JPY, GBP, CHF, SEK, and other currencies.
Reporting institutions are asked to identify individual other currencies if they have a material
amount of outstanding contracts in those currencies, for example, if a notional amount outstanding
in a currency for a given instrument is greater than 2% of the total notional amount outstanding for
that instrument.
Amounts outstanding of foreign exchange contracts are to be broken down on a single-currency
basis. This means that the notional amount outstanding and the gross positive or negative fair
value of each contract will be reported twice, according to the currencies making up the two "legs"
of the contract. The total of the amounts reported for individual currencies will thus be 200% of
total amounts outstanding. For example, a reporting institution entering into a forward contract to
purchase US dollars in exchange for euro with a notional principal amount of $100 million would
report $100 million in the USD column and another $100 million in the EUR column.
Equity-linked contracts must be categorized according to whether they are related to US,
Japanese, European (excluding countries in Eastern Europe), Latin American, other Asian or other
countries' equity and stock indices. The contracts should be allocated according to the nationality
of the issuer of the underlying rather than the country where the instrument is being traded. For
commodity, credit and "other" derivatives, no further breakdown by risk factor is required.

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E.

FR 3036
DRAFT

Maturities

For amounts outstanding of foreign exchange (including gold), interest rate and equity-linked
contracts, a breakdown is requested by remaining maturity according to the following bands:
•
•
•

one year or less
over one year and up to five years
over five years.

In the case of transactions where the first leg has not come due, the remaining maturity is to be
determined by the difference between the near and far-end dates of the transaction and not by the
date of conclusion of the deal.

F.

Categorization of derivatives involving more than one risk category

Individual derivatives transactions are to be categorized into six risk classes: foreign exchange,
single-currency interest rate, equity, commodity, credit and "other". Transactions should be
reported in only one risk category based on the contracts predominant risk character at the
origination of the derivative.

G.

Detailed instrument definitions and categorization

In each risk category OTC derivatives are in principle to be broken down into three types of plain
vanilla instrument (forwards, swaps and options). Plain vanilla instruments are those traded in
generally liquid markets according to more or less standardized contracts and market conventions.
If a transaction is composed of several plain vanilla components, each part should in principle be
reported separately. OTC foreign exchange derivatives outstanding should be defined and
categorized as follows:

1.

Foreign exchange transactions

Outright forward:

Transaction involving the exchange of two currencies at a rate agreed on the date
of the contract for value or delivery (cash settlement) at some time in the future
(more than two business days later). This category also includes forward foreign
exchange agreement transactions (FXA), non-deliverable forwards and other
forward contracts for differences.

Foreign exchange swap:

Transaction, which involves the actual exchange of two currencies (principal
amount only) on a specific date at a rate agreed at the time of the conclusion of
the contract (the short leg), and a reverse exchange of the same two currencies at
a date further in the future at a rate (generally different from the rate applied to the
short leg) agreed at the time of the contract (the long leg). Both spot/forward and
forward/forward swaps should be included. Short-term swaps carried out as
“overnight swaps” and “spot next swaps”, and “tomorrow/next day” transactions
should also be included in this category.

Currency swap:

Contract which commits two counterparties to exchange streams of interest
payments in different currencies for an agreed period of time and to exchange
principal amounts in different currencies at a pre-agreed exchange rate at
maturity.

Currency option:

Option contract that gives the right to buy or sell a currency with another currency
at a specified exchange rate during a specified period. This category also includes
exotic foreign exchange options such as average rate options and barrier options.

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Currency swaption:

OTC option to enter into a currency swap contract.

Currency warrant:

OTC option; long-dated (over one year) currency option.

2.

Single-currency interest rate derivatives

Forward rate agreement
(FRA):

Interest rate forward contract in which the rate to be paid or received on a
specific obligation for a set period of time, beginning at some time in the future, is
determined at contract initiation.

Interest rate swap:

Agreement to exchange periodic payments related to interest rates on a single
currency; can be fixed for floating, or floating for floating based on different
indices. This group includes those swaps whose notional principal is amortized
according to a fixed schedule independent of interest rates.

Interest rate option:

Option contract that gives the right to pay or receive a specific interest rate on a
predetermined principal for a set period of time.

Interest rate cap:

OTC option that pays the difference between a floating interest rate and the cap
rate.

Interest rate floor:

OTC option that pays the difference between the floor rate and a floating interest
rate.

Interest rate collar:

Combination of cap and floor.

Interest rate corridor:

1) A combination of two caps, one purchased by a borrower at a set strike and
the other sold by the borrower at a higher strike to, in effect, offset part of the
premium of the first cap. 2) A collar on a swap created with two swaptions - the
structure and participation interval is determined by the strikes and types of the
swaptions. 3) A digital knockout option with two barriers bracketing the current
level of a long-term interest rate.

Interest rate swaption:

OTC option to enter into an interest rate swap contract, purchasing the right to
pay or receive a certain fixed rate.

Interest rate warrant:

OTC option; long-dated (over one year) interest rate option.

3.

Equity and stock index derivatives

Equity forward:

Contract to exchange an equity or equity basket at a set price at a future date.

Equity swap:

Contract in which one or both payments are linked to the performance of equities
or an equity index (e.g. S&P 500). It involves the exchange of one equity or
equity index return for another, or the exchange of an equity or equity index
return for a floating or fixed interest rate.

Equity option:

Option contract that gives the right to deliver or receive a specific equity or equity
basket at an agreed price at an agreed time in the future.

Equity warrant:

OTC option; long-dated (over one year) equity option.

4.

Commodity derivatives

Commodity forward:

Forward contract to exchange a commodity or commodity index at a set price at
a future date.

Commodity swap:

Contract with one or both payments linked to the performance of a commodity
price or a commodity index. It involves the exchange of the return on one
commodity or commodity index for another, and the exchange of a commodity or
commodity index for a floating or fixed interest rate.

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Commodity option:

5.

FR 3036
DRAFT

Option contract that gives the right to deliver or receive a specific commodity or
commodity index at an agreed price at a set date in the future.

Credit derivatives

Credit spread forward:

Agreement to pay or receive at some time in the future a cash payment that
depends on the difference between a spread (i.e. the difference in yields
between two financial assets) agreed at contract initiation and that prevailing at
settlement.

Credit event/default swap:

Contract, which commits two counterparties to exchange a periodic fee in
exchange for a payment contingent on a default event or any other, agreed
change in the credit quality of a reference asset for an agreed period of time.

Total return swap:

Contract, which commits two counterparties to exchange the total economic
performance of a financial asset (defined to include all interest payments, fees
and any capital appreciation or depreciation) in exchange for a floating rate
payout based on a reference index (usually LIBOR plus a spread reflecting the
creditworthiness of the counterparty as well as the credit rating and liquidity of
the underlying asset).

Credit spread option:

Option contract that gives the right to receive a cash payment if a spread, i.e. the
difference in yields between two financial assets, widens beyond an agreed strike
level during a specific period.

H.

Guidelines and definitions for the reporting of additional information
on credit default swaps (Table 5)

1.

Coverage

Credit default swaps (CDS) are bilateral financial contracts in which the protection buyer (risk
shedder) pays a fixed periodic fee in return for a contingent payment by the protection seller (risk
taker), triggered by a credit event on a reference entity. Credit events, which are specified in CDS
contracts, may include bankruptcy, default, or restructuring.
Instrument types
The following instrument breakdown is requested:
•
•

Single-name instruments
Multi-name instruments

Single-name CDS are CDS contracts where there is one reference entity or asset specified.
Multi-name CDS are CDS contracts where there is more than one reference entity or asset
specified in the portfolio or basket credit default swaps or credit default swap indices. A basket
credit default swap is a CDS where the credit event is the default of some combination of the
credits in a specified basket of credits. In the particular case of an nth-to-default basket it is the
nth credit in the basket of reference credits whose default triggers payments.
Another common form of multi-name CDS is that of the “tranched” credit default swap. Variations
operate under specifically tailored loss limits – these may include a “first-loss” tranched CDS, a
“mezzanine” tranched CDS, and a senior (also known as a “super-senior”) tranched CDS.
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CExclude credit linked notes, options on CDS and total return swaps are not to be included as
credit default swaps.

2.

Sector (only for single-name instruments)

A breakdown is requested by economic sector of the obligor of the underlying reference obligation
(reference entity) as follows:
•

Sovereigns are defined as only entities of a country’s central, state, or local government.
They do not include government-owned financial or non-financial firms. Also exclude
international organizations (e.g., the World Bank).

•

Non-sovereigns are defined as all entities other than sovereigns (as defined above).

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