Quality of Derivatives Statistics: the Australian Experience

OECD Working Party on Financial Statistics, October 2007

What are derivatives?

A contract whose value depends on other asset(s) or index values

Swaps payments streams in $A for $USfixed interest for floating

Options to buy or sellshares, physical assets, etc

Futures, forward rate agreements Can be exchange traded or OTC Settled in cash or kind

SNA/BPM on derivatives

tradeable or offsetable net value, not notional principal assets positions, liability positions,

change over time most transactions are settlements revaluations is main item in stock

reconciliation

Intertemporal reconciliatione.g a swap

Opening Transaction Reval Closing Comment

t1 (asset) 0 0 10 10 created

t2 (asset) 10 0 -5 5 reval

t3 (asset>liab)

5 0 -5 0

}reval -6

t3 (liab) 0 0 1 1

t4 (liab) 1 -1 0 0 settled

Implementation in BoP, 1997

Direct collection attempted via IIS form 90

Info paper "the information reported to the ABS .... represents a degree of netting in both the positions and transactions flows"

expect improvement "as accounting standards develop and reporting systems are upgraded"

Subsequent improvementprovider coaching, IFRS

Implementation in ANA, 1998

Modelling from direct collection data Info paper:

"the quality of reporting of transactions in surveys is lower than for other data items"

"there is a significant amount of imputation in the estimates"

Reporting burden causes subsequent (2001) abandonment of bank (APRA) data collection to meet SNA (draft form ARF 320.6)

Summary of issues for direct collection

identification of net asset position and net liability position;

moving from a net asset to net liability; identification of new and settled

contracts; partitioning changes in value into

transactions, value changes and volume;

summarising by sector of counterparty; separation of derivatives from

assets/liabilities being hedged; data by type of derivative contract

Modelling derivatives

conservative market practicesNon-Fin corp and Govt: hedging not trading

use of relationship banker, foreign parent market research and regulatory data

AFMA turnover by type of contractAPRA gross positionsRBA report to BIS, infer counterparties

BoP/IIP data taken as a given

Model boundaries

Possible ways forward

IFRS/IAS39commercial accounting is moving in SNA direction, improved direct collection?

Stock/price modellingmodel trans and revals wrt asset pricesneeds "type of derivative" position classn

Leverage market research/regulatory datanot much enthusiasm

Security by security reportingprivacy, computing power

Future directions

Not much net lending in derivatives (outside fin corps)what are the costs/benefits of increased data collection?

What are the policy questions?foreign currency exposures and hedging surveys not addressed by SNA

Aim to develop collection options which populate SNA framework suitably and allow analytical views