A sharper snapshot of OTC derivatives

Amid the ongoing expansion in global derivatives markets, Canada’s over-the-counter (OTC) market continued its growth too, according to a new report from the Ontario Securities Commission (OSC). It provides an increasingly detailed picture of that market, thanks to improvements in reporting and data collection.

The value of gross notional outstanding OTC derivatives positions in Canada increased by 12.2% in 2025 — climbing to $121 trillion by the end of last year, up from $108 trillion at the start of the year, the OSC reported.

Interest rate derivatives make up the largest share of the market, accounting for 88.2% of the overall total — and, they led the growth too, rising 15.5% during the year to $106 trillion, up from $92 trillion at the start of the year. 

Currency derivatives represent 9% of the total, followed by equities at 1.4%, credit derivatives (1%) and commodities (0.4%), the report noted.

Within the interest rate category, interest rate swaps made up the bulk of this segment, 81.9%, the report showed — followed by cross-currency swaps (9.5%), forward rate agreements (4.3%) and other instruments (4.3%).  

At the same time, the OSC reported that the composition of active derivatives positions by asset class shifted significantly in 2025 — thanks primarily to improved reporting following regulatory reviews that identified many stale or expired contracts that were previously listed as active.

Based on this improved data, the regulator said that interest rate derivatives account for 47.2% of outstanding positions, followed by currency derivatives at 23.6%, equity derivatives (22.0%), commodity derivatives (6.2%) and currency derivatives at 1%.

The report also noted that the average size (gross notional outstanding) of OTC derivatives trades increased in 2025, led by equity derivatives, which saw their average size jump from just $0.6 million at the end of 2024 to $4 million by the end of 2025.

Again, improvements in the accuracy of reporting accounted for much of the change, as stale and expired trades were deleted, reducing the number of outstanding trades — thereby increasing the average transaction size.

Indeed, while the gross notional outstanding amount of equity derivatives rose by 14.8% in 2025, rising from $1.5 trillion in 2024 to $1.7 trillion, the number of outstanding transactions dropped by 82.2% — leading to the sharp jump in average size.

Index options, equity index swaps and basket swaps, “accounted for the majority of Canada’s equity derivatives,” the report said. These products collectively represent 72% of the total — with portfolio swaps, single-name swaps and single-name options accounting for 9.6%, 8.3% and 7.5% shares, respectively.  

Currency derivatives recorded the largest absolute increase in average size, jumping from $4 million in 2024 to $23 million in 2025, the report noted. The average size of interest rate derivatives also increased by 6.2% year over year, rising from $107 million to $114 million per transaction during the year, the OSC reported. The average size of credit derivative trades was also up 23.4%.

Turnover in OTC derivatives also increased in 2025, the report said, with quarterly gross notional turnover reaching a new high of $113 trillion in the fourth quarter.

Interest rate derivatives accounted for just over half of the quarterly turnover, $60 trillion worth, it noted, with another $50 trillion coming from currency derivatives — and just $3 trillion worth in credit, equity and commodity derivatives combined.

Among equity derivatives, four products — basket swaps, index options, single-name swaps and equity index swaps — accounted for 75.9% of the  quarterly turnover in the fourth quarter of 2025.

Alongside the improvements in data collection, the report also highlighted the increase in central clearing of OTC trades.  

Already, the vast majority of the interest rate derivatives traded in Canada are centrally cleared, the report said, with 95.7% being centrally cleared in the fourth quarter of 2025.

The latest amendments to central clearing rules took effect on March 25 of this year, updating the list of interest rate derivatives that are required to be centrally cleared in the wake of the financial benchmark reform, which resulted in the phase-out of traditional benchmarks such as LIBOR, and CDOR in Canada, that have been replaced by new metrics, including CORRA in Canada. 

The transition from CDOR to CORRA in June 2024 was accompanied by a temporary jump in OTC trading activity and an increase in the number of outstanding interest rate positions, the report noted. Since the transition to the new benchmarks took place, activity had continued to increase steadily, the report said, “indicating steady market adoption.”

Additionally, the latest changes to central clearing rules expanded the obligation to certain index credit default swap products.