The Bank for International Settlements published research in its Quarterly Review analysing the surge in global interest rate derivatives (IRD) turnover between April 2022 and April 2025. It links the increase to structural changes from benchmark reform away from Libor, the expansion of hedge fund arbitrage activity in government bond futures, and the cyclical impact of sharp shifts in monetary policy expectations since 2022. Average daily IRD turnover rose 87% to USD 25 trillion, with growth concentrated in exchange-traded (XTD) markets, where turnover reached USD 17.4 trillion per day, versus USD 7.9 trillion per day in over-the-counter (OTC) markets. In OTC markets, the transition to nearly risk-free rates made overnight index swaps (OIS) the dominant instrument, lifting OIS to 65% of global OTC IRD turnover in 2025 from 42% in 2022, while forward rate agreements (FRAs) largely disappeared in US dollar, sterling and yen markets; euro FRAs remained sizeable due to continued Euribor usage, though their share of euro IRD turnover fell from 25% to 17%. The research also highlights the role of the cash-futures basis trade in boosting XTD positioning, particularly in US Treasury futures, and notes that rate volatility and repricing of policy paths boosted turnover in short-rate futures, including USD one- and three-month SOFR futures (USD 4.5 trillion average daily turnover) and fed funds futures (USD 2.1 trillion) over the 12 months to April 2025. For emerging market economy currencies, turnover reached USD 0.5 trillion per day but remained overwhelmingly OTC-driven, with further deepening constrained by limited local government bond futures markets and a concentrated, cross-border clearing structure dominated by the London Clearing House and the Chicago Mercantile Exchange. The paper concludes that market deepening may be held back by the complex geography of central clearing and the absence of XTD government bond futures in many jurisdictions, while pointing to improved clearing access and development of local XTD markets as potential enablers.
Bank for International Settlements 2025-12-08
Bank for International Settlements research finds global interest rate derivatives turnover up 87% to USD 25 trillion per day amid post-Libor shift and basis trades
The Bank for International Settlements' Quarterly Review reports an 87% rise in global interest rate derivatives turnover from April 2022 to April 2025, driven by benchmark reform, hedge fund arbitrage, and shifts in monetary policy expectations. Exchange-traded markets grew significantly, with overnight index swaps dominating over-the-counter markets. The study highlights challenges in market deepening due to central clearing complexities and the lack of exchange-traded government bond futures in many regions.