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MARCH TO AUGUST : SYSTEMIC RISK CONCERNS 

Notional Amount and Gross Market
Value of OTC Derivatives Outstanding
IN TRILLIONS OF DOLLARS, SEMIANNUAL

Notional Amount Gross Market Value
$800 $40
700 35
600 30
500 25
400 20
300 15

200 10
100 5
0 0
1999 2001 2003 2005 2007 2009
June 2010
SOURCE: Bank for International Settlements

Figure .

the global derivatives market. At the end of June , the notional amount of the
over-the-counter derivatives market was  trillion and the gross market value was
 trillion (see figure .). Adequate information about the risks in this market was
not available to market participants or government regulators like the Federal Re-
serve. Because the market had been deregulated by statute in , market partici-
pants were not subject to reporting or disclosure requirements and no government
agency had oversight responsibility. While the Office of the Comptroller of the Cur-
rency did report information on derivatives positions from commercial banks and
bank holding companies, it did not collect such information from the large invest-
ment banks and insurance companies like AIG, which were also major OTC deriva-
tives dealers. During the crisis the lack of such basic information created heightened
uncertainty.
At this point in the crisis, regulators also worried about the interlocking relation-
ships that derivatives created among the small number of large financial firms that
act as dealers in the OTC derivatives business. A derivatives contract creates a credit
relationship between parties, such that one party may have to make large and unex-
pected payments to the other based on sudden price or rate changes or loan defaults.
If a party is unable to make those payments when they become due, that failure may