Description of Derivatives Contracts Data
Data on U.S. resident holdings of, and transactions in, derivatives contracts with foreign residents are collected quarterly by the TIC Form D. The data cover both Over-The-Counter (OTC) contracts and Exchange Traded contracts. The data are collected from banks, securities brokers and dealers, and nonfinancial companies in the U.S. with sizable holdings of derivatives contracts.
A derivative contract is a financial contract whose value is derived from the values of one or more underlying assets, reference rates, or indices of asset values or reference rates. Common types of derivatives contracts include forwards, futures, swaps and options. The TIC Form D collects data on derivatives contracts that meet the FASB Statement No. 133 definition.
Holdings of derivatives contracts are measured by their fair (market) values, where the fair value is generally defined as the amount for which a derivative contract could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The fair value is different from a derivative's notional amount, which is the number of currency units, shares, bushels, pounds, or other units specified in a derivative instrument and used to compute the payouts from the contract.
Derivatives contracts are separated and aggregated according to whether, from the perspective of the U.S resident, a contract's fair value on the last day of the quarter is positive or negative. The gross positive (or negative) fair value is the sum of all derivatives positions with positive (or negative) fair values from the U.S. resident's perspective.
The data on U.S. net settlements with foreign residents include all cash receipts and payments made during the quarter for the acquisition, sale, or final closeout of derivatives, including all settlement payments under the terms of derivatives contracts such as the periodic settlement under a swap agreement and the daily settlement of an exchange-traded contract. In calculating net settlements, U.S. receipts of cash from foreign persons are positive amounts (+), and U.S. payments of cash to foreign persons are negative amounts (-). Items excluded from net settlements are: (a) commissions and fees (they are regarded as transactions in financial services rather than as transactions in derivatives); (b) collateral including initial and maintenance margins, whether or not in the form of cash; and (c) purchases of underlying commodities, securities, or other non-cash assets (e.g. the purchase/sale by foreigners of an underlying long-term security is reported in the TIC data on transactions in long-term securities).
The gross positive and negative fair values and net settlement payments on derivatives contracts are reported by country based on the residence of the direct foreign counterparty. Positions of foreign customers on U.S. exchanges are reported opposite the country in which the foreign counterparty resides. In the case of U.S. residents futures contracts on foreign exchanges, the country of the exchange is reported as the country of the foreign counterparty. In the last case where a U.S. resident trades on a foreign exchange, the country information may not always reflect the ownership of the ultimate holder of the risk in the contract.
Additional information on the use and interpretation of the data collected on TIC Form D is available in a recent Federal Reserve Bulletin article (available at http://www.federalreserve.gov/pubs/bulletin/default.htm). The data on derivatives contracts will be reported also in the Treasury Bulletin, in Section V of CAPITAL MOVEMENTS.