Explosive Growth in IRD, Credit & Crypto Derivatives Meets Tough New Rules from ESMA & UK EMIR

The derivatives market in 2025 has been reshaped by macro volatility, regulatory shifts, and the growing peripheralization of crypto into mainstream risk-management strategies.

Volume and Strategic Positioning. Trade notional in major OTC derivative categories—interest rate derivatives (IRD) and credit derivatives—has surged. The IRD market, notably led by OIS, saw over 50% YoY growth in notional; index CDS rose ~23% YoY while trade counts fell, indicating a move toward fewer, larger trades versus speculative activity.

Crypto’s Institutional Leap. CME’s crypto derivatives metrics in Q3 2025 provide compelling evidence of institutional adoption: over $900B in combined volume, record ADOI of approximately $31.3B, and high open interest peaks in ETH futures and options. Altcoins SOL and XRP also crossed notional thresholds ($34B for SOL, $23.7B for XRP) that previously belonged mostly to BTC/ETH products.

Regulation Tightens Across Jurisdictions. The EU finalized transparency and consolidated tape rules for OTC derivatives under MiFIR’s derivatives review, slated to begin 1 March 2027. Active-account CCP requirements under EMIR were legislated mid-2025. UK EMIR REFIT imposed much stricter reporting infrastructure (204 fields, ISO-20022 formatting) as of September 30, 2024, with full compliance expected by March 2025.

Strategic Implications.

• Market participants will need greater investment in data systems and middle-office capabilities to comply with enhanced reporting demands, including transaction identifiers, reconciliations and real-time transparency obligations.
• Diversification beyond BTC into ETH, SOL, and XRP in regulated venues suggests opportunity for product innovation, clearing infrastructure expansion, and risk mitigation tools for crypto derivatives.
• Regulatory reform tightens oversight and increases costs for compliance, but the improvements in transparency may also reduce information asymmetry, potentially lowering risk premia across derivatives markets.

Open Questions and Risks.

• Will CCPs and clearing houses scale capacity fast enough to absorb the increase in notional and open interest without creating systemic risk?
• How will regulatory divergence between the UK, EU, and US affect cross-border derivatives activity, equivalence regimes, and trading venue choice?
• What impact will increased transparency exert on market behavior—particularly in terms of liquidity, market impact costs, and trade execution in less liquid derivatives (e.g., small credit names, exotic products)?