Financial Supervisory Service www.fss.or.

kr

Press Release
April 1, 2014 Derivatives Trading by Financial Companies, 2013 Trading volume Financial companies traded derivatives of KRW57,121 trillion in 2013, down 5.7% or KRW3,443 trillion from a year earlier. Exchange-traded derivatives declined, contributing to the drop in total derivatives trading volume, while OTC derivatives trading remained similar to the previous year. Table 1. Derivatives Trading by Financial Companies
2011 Exchange-traded OTC Total 70,011 12,940 82,951 2012 48,420 12,144 60,564 (In trillions of KRW, percent) Chng 2013 Amount Pct 45,101 -3,319 -6.9 12,020 -124 -1.0 57,121 -5.7 -3,443

Stock-related and currency-related derivatives trading declined, while interest raterelated and credit- related derivatives trading increased. Stock-related derivatives declined 8.6% to KRW37,456 trillion, due to a drop in securities companies proprietary trading of futures and options amid low volatility of the index. Currency-related derivatives also declined 3.4% to KRW9,957 trillion, due to a drop in currency forwards by banks amid low foreign exchange rate volatility. In the meantime, interest rate-related derivatives increased 4.7% to KRW9,634 trillion, due to a rise in interest rate swaps by banks and securities companies with high speculative and hedging demand amid increased volatility of interest rates. Creditrelated derivatives also increased 46.1% to KRW41 trillion, due to a rise in credit default swap trading by securities companies.

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Table 2. Derivatives Trading by Type and Sector

(In trillions of KRW) 2013 2012 Total Bank Securities Insurance Trust1 Others2 Stock-related 40,988 37,456 83 36,879 25 153 316 Futures & options 40,825 37,334 58 36,786 21 153 316 Interest rate-related 9,203 9,634 3,605 5,352 32 152 493 Interest rate swaps 2,320 2,588 2,199 385 1 2 1 Currency-related 10,307 9,957 8,721 668 43 381 144 Currency forwards 9,107 8,695 8,089 252 26 322 6 Credit-related 28 41 3 37 1 0 0 CDS 21 33 3 30 0 0 0 Others3 38 33 12 14 0 6 1 Total 60,564 57,121 12,424 42,950 101 692 954 1 Trust sector includes funds of asset management firms and trust accounts of banks and securities firms. 2 Other financial companies include merchant banks, futures companies, and credit card companies 3 Other derivatives include jewelries, other metals, and agricultural, livestock and fisheries products.

Securities companies accounted for 75.2% of total derivatives trading, mostly with stock-related derivatives that account for the lions share, followed by banks 21.7%, futures companies 1.7%, trust 1.2% and insurance companies 0.2%. The majority of counterparties to OTC derivatives trading were foreign financial companies (35.6%) and foreign bank branches in Korea (31.1%). Outstanding volume The outstanding balance of total derivatives at the end of 2013 came to KRW6,904 trillion, up 0.7% or KRW46 trillion from a year earlier. Both exchange-traded and OTC derivatives increased and, in particular, the outstanding balance of exchange-traded derivatives increased due to the extended holding period, despite a drop in trading volume. A rise in OTC derivatives holdings by securities companies driven by increased hedging demand greatly contributed to the rise in total OTC derivatives balance. Table 3. Outstanding Balance of Derivatives
2011 Exchange-traded OTC Total 70 6,911 6,981 2012 76 6,782 6,858 (In trillions of KRW, percent) Chng 2013 Amount Pct 83 7 9.5 6,821 39 0.6 6,904 46 0.7

By sector, banks accounted for 88.0% as they mostly trade currency-related and interest rate-related derivatives with relatively long maturity, followed by securities companies 10.6%, insurance companies 0.6% and trust 0.6%. Despite continued slump in exchange-traded derivatives trading, OTC derivatives trading remained stable due to its growing popularity as a tool of long-term risk management. The share of securities companies in OTC derivatives market has been on the rise from 5.2% in 2011 to 10.0% in 2013. In addition, the type of the underlying assets of ELS and DLS is having a greater impact on the trading in the derivatives
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markets as the ELS and DLS market grew steadily.

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Contact Person: Park Mi-Kyung Foreign Press Spokesperson Public Affairs Office Financial Supervisory Service Tel: +82-2-3145-5803 Fax: +82-2-3145-5808 E-mail: pmk620@fss.or.kr

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