1Q15 ISDA SURVEY
It’s May 2015, almost 8 ½ years since the first crack in the wall began when late monthly payments on new mortgages (30 years) began. And so we are now 8 ½ years on, bills have been passed; procedures implemented and processes have changed. ISDA’s SURVE OF ISSUE & TRENDS FOR THE DERIVATIVES END USER COMMUNITY FOR APRIL 2014.
The survey includes 376 respondents. Respondents did not have to answer every question only those questions which applied to them.
Type of Firm: 31.4% Financial Institutions (118)
22% Non-Financial Corps (83)
6% Governments (23)
5.8 5% Energy Companies (22)
10.64% Other (40)
Location: 87.07% came from Europe and the Americas (145: Europe); (191: No. America)
22.60% trade between 101 – 500 contracts
32.15% trade between 0 – 100 contracts
36.24% trade more than 500 contracts
Fragmentation along geographical lines and lack of confluence between local law: :
69.4% said yes
37.6% said no
7.90% said no, the Market is not fragmenting
If answered “yes” above, what impact, if any, is it having on your firm’s ability to manage risk?
52.4% Negative Impact
4.00% Positive Impact
24.1% No Impact
Questioned as to whether the respondent experienced any changes in Liquidity over the past year (.i.e.: number of dealers Width & Depth of bid/ask spreads or availability of certain products.), showed a scatter of replies
6% Liquidity improved
22.61% Liquidity unchanged
36.23% Liquidity Deteriorated
35% NOT SURE/ NO OPINION
COST OF HEDGING
To the question have Hedging costs changed over the past year, ISDA received replies as follows:
57% Costs Increased Substantially ( 12.6%), Increased a Little (40.5%)
28% Not Sure/ No Opinion
3.81% Decreased a little (3.52%), Decreased substantially (.29%)
Has the numberof derivatives dealers willing to offer your firms derivatives prices changed over the past year?
91.61% No change in dealers (30.54%)
34.43% Fewer dealers (34.43%)
26.64% Not sure, no opinion (26.64%)
If you believe that liquidty has deteriorated, then what impact if any, is it having on your ability to manage risk?
64.8% Negative Impact
34.33% No Impact/ No opinion
.82% Positive Impact
DERIVATIVES USAGE, RISK MANAGEMENT & YOUR ENTITY
How important are derivatiives to your risk Management Strategy?
53.9% Very Important
10.18% No opinion / Not Important
In what ways are derivatives important to your firm’s business and investment decision-making? (Ocheck all that apply)
66.7% Manage Exposures to improve pricing, operating expenses & Returns
41.74% Hedge Exposures in international markets to maintain ehance our competitiveness
37.84% Reduce Financing costs & Managing the cost of capital to invest in the business
27.63% Hedging risks of new activities and investments can invest for growth
Do you expect the use of derivatives wi increase, decrease or stay the same in the 2Q15.
16.31% Think usage Increases
77.34% Stay the same/No opinion/Not Sure
6.34% Think usage Decreases
The was the wisdom of the ISA respondents. I look forward to hearing the FIA’s SEF Trackers. SEF’s have been creating bit of Execution Fragmentation making it difficult to gain iany traction. But more on that in another blog