The State Of The Deravitave Market -Concentrated

Posted on May 26, 2012 by Anthony Taylor
         26th May 2012

The  state Of  Derivative Markets

According to a recent report by Larry Levine fianancial analysts and trusted source, the top 5 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 account for 95.9% of all derivative exposure.
 
The top 4 banks: JPMorgan with $78.1 trillion in exposure, City with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively.
 
And that’s your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all-time-high. By definition the market is a concentrated one clearly dominated by the top four banks.
 
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