| 13-Nov-2024
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We Have New Block Sizes |
Block Calibration It has been a long journey to finally arrive at the “go-live” for new block thresholds on October 4th 2024. I covered it here on the blog, so rather than re-hash what has happened, please refer to the old posts linked below: Suffice to say that there have been more than a few […]
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| 5-Nov-2024
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US Election Live – What is Trading? |
15:30h London (5th November) As we set up for tomorrow’s trading activity, we are seeing unusually large amounts of activity in 10Y15Y30Y Butterfly so far today; Showing; We will update this blog with what is unusually active, and track price moves accordingly. Stay tuned! 11am London (5th November) Ahead of the results (and any contests […]
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| 30-Oct-2024
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EUR Rates – What’s New? |
Time for another installment of my “What’s New” series, looking at dynamics (mainly volumes!) in different currencies. I follow EUR markets pretty closely, particularly through the lens of €STR futures market share and what is happening with EUR swaps. Today, I’ll take a look at most aspects of EUR trading. EUR Outright Volumes I like […]
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| 21-Oct-2024
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RFR Adoption Q3 2024 |
Time for a quarterly check-in on RFR trading. The data provides a high-level overview of trading activity across all Rates products. Clarus API – CCPView As a reminder from previous blogs, Clarus microservices allow me to query numerous volume measures from CCPView. That means I have rebuilt the RFR Adoption Indicator using just two queries to pull in DV01s traded across all products […]
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| 16-Oct-2024
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3Q24 CCP Volumes and Share in IRD |
Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volumes. Today we look at 3Q24 volume and market share in IRD for: Which show record high volumes for USD, JPY, EMEA and APAC Swaps. Onto the charts, data and details. Volumes and Market Share For major currencies […]
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| 8-Oct-2024
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Pre-Hedging in Swaps |
FMSB The FICC Markets Standard Board (see my 200th Clarus blog), known as the FMSB, recently published the paper “Spotlight Review on Pre-Hedging“. It makes great reading for anyone involved in Swaps markets – dealers, sales, trading, buyside. Read it! What is “Pre-Hedging”? According to the FMSB report, pre-hedging is the act of a dealer […]
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| 1-Oct-2024
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NDF Clearing – The latest updates |
NDF Cleared Volumes CCPView shows that cleared NDF volumes continue to grow: Showing; Which NDF Currency Pairs are the largest? Looking into the August 2024 data per currency pair shows: NDF Clearing Rates Regular readers will know that we use the CFTC weekly Swaps Report to monitor how much of the NDF market is cleared. The large […]
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| 25-Sep-2024
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€STR Volumes and Market Share August 2024 |
€STR Futures Our €STR Dashboard summarises key liquidity attributes in this growing market: Showing; Open Interest CCPView provides all the data we need on Open Interest for €STR futures: EURIBOR EURIBOR continues to dominate EUR STIR future volumes, despite €STR becoming more and more significant. €STR Options August 20th saw the first €STR Options trade: There […]
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| 14-Mar-2018
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NDF Clearing February 2018 |
We update our NDF Clearing Analysis. A minimum of 17% of the market is now cleared. Clearing volume can account for up to 30% of volumes in some currency pairs. Uncleared Margin Rules continue to motivate clearing. All Time Record Volumes Cleared NDF volumes continue to grow at an impressive rate. Since we last looked […]
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| 20-Mar-2018
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Libor OIS – What is Going On? |
Libor OIS spreads have been widening. Trading volumes across these products have also shown a spike in activity. We look at price-volume charts and DV01 figures for OIS swaps. We also update our CHF SARON OIS volumes, where a total of CHF37.5bn has now traded versus this new index. Libor OIS Spreads Last week, it […]
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| 21-Mar-2018
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SONIA Market March 2018 |
The new SONIA benchmark becomes effective 23rd April 2018. The average maturity of a SONIA swap has doubled in 2018. Is this increase in duration evidence of a behavioural change in markets? SONIA Reform Regular readers will know that SONIA has been subject to a Consultation by the Bank of England, with the intention of […]
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| 27-Mar-2018
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MIFID II Data – APA Market Share |
MIFID II transparency is still falling well short of what the market needs. We can only estimate APA market share using a highly manual process. Our team have gathered data from the 5 largest APAs. We look at market shares across Sovereign Bonds. Same old gripes As we all know, MIFID II transparency is still […]
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| 28-Mar-2018
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FRTB – Revisions to market risk capital requirements |
The BCBS published a Consultative document in March 2018 with the title ‘Revisions to the minimum capital requirements for market risk” and in this article I look at the details. Background In January 2016, the BCBS published the standard Minimum capital requirements for market risk ( “January 2016 standard”), designed to address a number of structural shortcomings in […]
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| 4-Apr-2018
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Swaps Data: A MiFID-shaped hole |
My monthly Swaps Review in Risk Magazine looks at: Global volume in Cleared USD Swaps at LCH and CME US Swap Execution Facility volumes US Off SEF volumes MiFiD II so far failing to provide meaningful data USD OIS Swap volumes The challenge for SOFR Please click here for free access to the full article […]
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| 4-Apr-2018
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LIBOR OIS – March 2018 Update |
Libor-OIS spreads have recently started to retreat from the wides hit in the middle of March. 1 year Libor-OIS spreads in USD reached as high as 45.25 basis points. They have since traded as low as 40.25bp. Notional volumes across all indices in March hit all time highs, 3 times the levels seen in 2017. […]
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| 8-Apr-2018
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TraderTV Interview on MiFID II |
Amir’s interview on MiFID II with Dan Barnes of TraderTV.
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| 9-Apr-2018
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Cross Currency Swaps and Libor-OIS |
USD can be funded domestically or in international funding markets. These two funding markets create natural links between Libor-OIS spreads and Cross Currency Basis. We saw record volumes in USD Libor-OIS trading over the past three months. We also saw record notional volumes traded in Cross Currency Basis during Q1 2018. However, when we look […]
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| 9-Apr-2018
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Segregated Funds, Market Crashes & Under-Seg |
Today I want to look briefly at the reported solvency of FCM’s during the most recent market panic. Back on February 5th of this year, the US equities market suffered a volatile day and significant losses. The Dow Jones index had its worst ever one-day loss in terms of points (down 1,175), and other indices […]
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| 18-Apr-2018
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Mar 2018 Swaps Review – SDR Data in 9 Charts |
Continuing with our Swaps review series, let’s look at volumes in March 2018, focusing just on SDR Data. Summary: USD IRS volumes in 1Q 2018 are 11% higher than 1Q 2017 USD IRS On SEF Compression, a record month in Feb 2018 USD Swap Curve flattened by 12 bps over the month USD OIS volume exceeded the gross notional of USD IRS EUR, GBP, […]
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| 18-Apr-2018
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USD Libor is changing! |
ICE are planning to change the calculation methodology for LIBOR. LIBOR is not currently (April 2018) transaction based – it remains a survey. ICE would like to change this so that it can be based on transactions, but not all Libor tenors see transactions every day. There is therefore a new suggested “waterfall” methodology to […]
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| 25-Apr-2018
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OIS Volumes – What is the Trend? |
We summarise the portion of risk that is traded as OIS across seven major markets. Benchmark reforms around the globe are helping transition trading away from Libor into Risk Free Rates. We can monitor the progression of these reforms by looking at the current state of play in each market. OIS Changes The 1 year […]
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| 25-Apr-2018
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Mar 2018 SEF Market Share Statistics |
In this article I will look at Q1 2018 Swap Execution Facility (SEF) market share for Credit, Foreign Exchange and Interest Rate Derivative asset classes, in a similar format to my 2017 SEF Market Share Statistics. Clarus SEFView has daily volume data published by each SEF, which is filtered, normalised and aggregated to allow meaningful comparison of […]
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| 1-May-2018
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Enterprise Software Vendor to a Cloud Service |
I recently joined Clarus Financial Technology after 15 years of working for one of the premier enterprise software companies in capital markets. My first month has been an eye-opening experience in the stark difference in how cloud vendors operate and what this means for employees and customers. Below is a short summary of what I […]
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| 2-May-2018
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Swaps Regulations Are Changing – Part One, SEFs |
What You Need to Know Last week, the CFTC Chairman, Christopher Giancarlo, presented a whitepaper at the annual ISDA shindig. This whitepaper should be a pretty good guide for any regulatory changes that we can expect to see out of the CFTC for the remainder of his term (it expires in April 2019). He looked […]
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| 8-May-2018
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Swaps Data: The Allure of Liquidity |
My monthly Swaps Review in Risk Magazine looks at execution venue market share in 1Q 2018 for: CDS Index NDFs by currency pair FX Options by currency pair Interest Rate Swaps by major currencies Bloomberg MTF for EUR IRS In simple terms, it shows that volume is either dominated by a single venue or split […]
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| 9-May-2018
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Swaps Regulations Are Changing – Part Two, Capital and CCPs |
What You Need To Know Swaps Regulation 2.0 is a whitepaper that was presented by Chairman of the CFTC, Christopher Giancarlo, at the annual ISDA AGM. The paper sets out 6 broad areas of reform for Swaps markets. We looked at (1) Trade Execution and (2) Trade Reporting in Part One. This week, we look at […]
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| 16-May-2018
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SOFR – What you need to know |
Major markets across our industry are looking to transition (some) liquidity away from Libor-based products and towards Risk Free Rates. We’ve variously looked at Libor Reform, Euribor, SONIA and SARON but so far have not done a deep dive into new RFRs in the US. SOFR – What is it? As we reported in our […]
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| 16-May-2018
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CCP Basis and Volume in Major Currencies |
Almost a year has passed since we last looked in detail at CCP Basis, which just goes to show how normal and accepted this has become in the market. Since the shock emergence of the CME-LCH Basis Spread in June 2014, we have seen regular trading of CME-LCH Switch trades to manage the CCP Basis […]
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| 22-May-2018
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NDF Volume Data |
The challenges in Emerging Markets recently, as well as finding different data sources for NDFs, prompted me to refresh our data on FX markets. Is Clearing still accelerating for NDFs? It looks that way. Clearing accounted for 16% of the total market, even before the recent 30% growth in Cleared volumes. 2018 Q1 and March […]
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| 23-May-2018
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Identifiers, Identifiers, Everywhere |
Anyone working in Capital Markets technology cannot have failed to notice the increase in global identifiers; they now seem to be everywhere for all manner of use cases, some mandatory others best practice. Often a new identifier is held up as a solution to an existing data problem and is promulgated by regulators as a […]
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| 29-May-2018
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Current Exposure Methodology – What You Need To Know |
The Current Exposure Methodology is a key part of Leverage Ratio calculations. It dates back to the late 1980s and the first Basel accords on banking capital. CEM calculates the Potential Future Exposure of a derivative trade using a look-up table based on Asset Class and Maturity. CEM is a very simple, notional-based measure of […]
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| 29-May-2018
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MIFID II Data – It’s Finally Good News! |
The availability of MIFID II data has been one of our hot topics in 2018. We’ve aired our frustrations previously. Happily, MIFID II data is about to become truly accessible to all. Find out how and why below. Questions and Answers ESMA have just released an updated “Questions and Answers On MiFID II and MiFIR […]
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| 5-Jun-2018
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FICC Markets Standards |
Regulations can only take us so far in improving our markets. Industry Standards to cope with conflicts of interest are therefore being created by the FMSB and backed by all large market players. Swap-pricing tied to the issuance of new bonds is a complex area that the FMSB is creating Standards for. We take a […]
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| 6-Jun-2018
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CCP Margin Calculation |
Margin Calculations directly from Excel Are you using LCH SMART, CME CORE or ASX Online? Would you prefer to use Excel? For IM & VM Calcs, What-ifs, Optimize and more 14-day trials are available to members and clients Background CCPs provide software tools for their members and clients to estimate initial margin requirements. Generally these […]
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| 11-Jun-2018
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Swaps Data: Anatomy of a Wild Week in USD Swaps |
My monthly Swaps Review in Risk Magazine looks at the recent market volatility resulting from Italian political events, which caused investors to move out of euros and into dollars and treasuries: 29th May, saw large falls in USD Swap Rates Swap volumes three times higher in major tenors How prices moved during the day Recovery […]
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| 13-Jun-2018
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Settle To Market – What You Need To Know about STM |
Settle to Market is a recent innovation in derivatives trading. It has helped banks reduce regulatory capital and derivatives exposures. We look at STM in detail and compare it to collateralisation. The CFTC have also issued guidance on the subject. What You Need To Know Settle to Market (STM) treats Variation Margin at CCPs as […]
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| 19-Jun-2018
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FRTB in Excel |
FRTB Calculations directly from Excel. What-If analysis of new trades via quick trade entry. We use the CRIF format to make entry of trade portfolios simple. FREE 14-day trials available here. Background FRTB in Excel from Clarus calculates the capital requirements for your portfolio in Excel. We also check whether risk factors are modellable. The […]
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| 19-Jun-2018
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You Like the Clarus Blog, But what do we Sell? |
Travelling around Asian financial centres, I frequently meet people that read the Clarus Blog and I often get asked “You have great blog articles and free research but what do you sell?”. In my article today, I will answer this question. First, Some Info Our weekly newsletter gets published, rain or shine, every Wednesday at […]
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| 26-Jun-2018
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Benchmark Reform – An EONIA replacement is coming very soon! |
Europe is deciding upon the Risk Free Rate to use in the future. There are three candidate rates – two are secured, and one is unsecured. We look at the details of the fixings and the volume data. There is an on-going public consultation which we would encourage our readers to respond to. Background Back […]
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| 27-Jun-2018
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Margin Requirements for Non-cleared Derivatives |
A new study funded by ISDA on Margin Requirements for Non-cleared Derivatives authored by Professor Rama Cont of Imperial College London, was the topic of much comment and debate at the ISDA AGM. It was also covered extensively in the press, see CFTC, Treasury officials boost ISDA push for IM revamp and ISDA faces member backlash […]
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| 4-Jul-2018
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Creating a Dashboard for Margin Attribution |
Clarus Microservices make it very easy to create Dashboards Tables, Charts, Panels are easily created with python scripts A complex portfolio analytic such as Margin Attribution is presented Our Browser Sandbox allows you to try yourself Introduction Generally a firm will have a single margin account at a CCP, as this is most efficient for netting. […]
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| 5-Jul-2018
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FRTB – Basic Approach for CVA |
Introduction A core component of managing bilateral exposures is CVA – Credit Valuation Adjustment. The grandfather of all XVAs, it describes the change in exposure we have to a counterparty as a result of changes in both the mark-to-market of a derivative and the change in credit-worthiness of our counterparty. Today, we’ll look at the […]
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| 9-Jul-2018
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How Much Data Do We Have? |
We saw record cleared volumes in vanilla IRS in June 2018. We take a look at the data behind these records. SDR data covers 60% of cleared volumes in USD swaps. SDR data also covers non-USD swaps and we quantify exactly what proportion of the market it covers. Introduction With MIFID data soon to be […]
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| 11-Jul-2018
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Swaps Data: The Big Get Bigger in Cleared Swaps |
My monthly Swaps Review in Risk Magazine looks at global cleared volumes by CCP in 1H 2018 compared to 1H 2017 for: USD IR Swaps, EUR IR Swaps, JPY IR Swaps CDS Index and Single-name, USD and EUR Non-Deliverable Forwards Showing strong growth in all of these, except one. Please click here for free access […]
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| 11-Jul-2018
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A Dashboard for Interest Rate Risk |
Clarus Microservices make it very easy to create Dashboards Dashboards that perform new risk calculations (not just display old ones) Interest rate risk measures such as DV01 and IR Delta can be calculated Tables, Charts, Panels can be easily created with a single line of Python code Our Browser Sandbox allows you to try yourself Introduction […]
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| 17-Jul-2018
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EUR Swap Volumes by Tenor |
Last week I briefly covered cleared EUR Swap volumes in Swaps Data: The Big Get Bigger in Cleared Swaps, so today I will look in more detail into these and specifically LCH SwapClear volumes by tenor. Average Daily Volume (ADV) Lets start with ADV by month for EUR Interest Rate Swaps cleared at LCH SwapClear, […]
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| 17-Jul-2018
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SOFR Swaps Are Trading! |
We have now had six SOFR swap trades hit the SDRs. Both Basis vs Fed Funds and Outright OIS has traded. All trades have been $50m and one year maturity. It looks like they were all cleared at LCH. The first swap was done on the TP-ICAP SEF. SOFR Everything you need to know about […]
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| 25-Jul-2018
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ISDA SIMM in Python Dashboards |
ISDA SIMM is the industry standard for calculating Initial Margin on non-cleared derivatives The Clarus Microservices API makes it very easy to compute ISDA SIMM™ from Python What-if trades can be easily added to determine the incremental change in SIMM Margin Before and after SIMM Margin levels can be easily displayed in charts and tables CRIF format risk sensitivties can […]
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| 25-Jul-2018
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LIBOR Fallbacks |
ISDA have launched a consultation for a fallback mechanism in the event that a LIBOR rate ceases to be published. This would mean that any contract referencing the LIBOR rate and governed by the ISDA 2006 Definitions would use these proposed “fallback” rates. How Will it Work? The consultation document states that fallbacks will be defined in […]
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| 1-Aug-2018
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Swaps Data: OTC Margin Up, Futures Margin Down |
My monthly Swaps Review in Risk Magazine looks at the most recent CPMI-IOSCO Quantitative Disclosures by Clearing Houses for Interest Rate Swaps, Credit Default Swaps and Futures and Options Showing strong year-on-year growth in each of these, except the last. I also look at the trend in client IM at LCH SwapClear and the maximum Variation margin call […]
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| 1-Aug-2018
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How much of the swaps market is traded as an OIS? |
We summarise the portion of risk that is traded as OIS across seven major markets. Benchmark reforms around the globe are helping transition trading away from Libor into Risk Free Rates. We monitor the progression of these reforms by looking at how much risk is trading in OIS products. How popular are OIS? Clarus use our data products, […]
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| 6-Aug-2018
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Creating a Swaps Dashboard using Python |
Clarus Microservices make it easy to get Swaps data Swap volumes can be retrieved from SDRs using simple Python This data can be displayed in Tables and Charts Our Sandbox allows you to try quickly in your Browser Introduction Under the Dodd-Frank Act, all swaps, whether cleared or uncleared, that are executed by US persons, […]
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| 7-Aug-2018
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More SOFR Swaps are Trading |
Fannie Mae recently issued its first ever securities linked to SOFR (see here for details). The issuance was $6 billion in size, settled on 30 July with 6m, 12m and 18m tranches. So I wanted to update our recent SOFR Swaps Are Trading blog and see if this bond issue has led to any more […]
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| 14-Aug-2018
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How are Futures on Bitcoin doing? |
We last looked at Bitcoin Futures in January 2018, shortly after their launch by CBOE and CME, so high time to re-visit these to see how volumes have performed. Monthly Volumes In SEFView we collect daily volumes and aggregating these to look at YTD monthly volumes. Growth since January, but certainly not one that requires […]
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| 14-Aug-2018
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USD Spreadovers and SEF Market Share |
Spreadovers account for roughly 35% of all USD risk traded on-SEF. In D2D USD swap markets, Spreadovers account for about 70% of volumes. This makes them by far the most important packages traded in USD. Almost all Spreadovers are transacted on a SEF. We look at D2D SEF market share in USD swaps. History We […]
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| 22-Aug-2018
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LIBOR OIS August 2018 Update |
Libor-OIS spreads have collapsed since we last wrote about them in March. 1 year Libor-OIS spreads in USD have retreated to under 30 basis points. Notional traded has continued to be higher than in 2017. Cross currency basis has also moved tighter. We also take a quick look at OIS future volumes. Libor OIS Our Libor-OIS blogs […]
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| 28-Aug-2018
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Capital and RWA for Tier 1 US Banks – 2Q 2018 |
Last year we wrote about Capital Ratios and Risk Weighted Assets for Tier 1 US Banks and that blog remains popular to this day. Today I will provide an update using the latest quarterly figures, to see if the trend we observed with US Banks increasing capital and reducing RWA has continued into 2018. Background The Basel […]
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| 29-Aug-2018
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SONIA Term Rates |
The Bank of England is running a consultation on term SONIA reference rates. We take a look at a complementary solution. We produce compounded SONIA in-arrears term fixings to help end-users adopt SONIA. Making Our Lives Easier François Jourdain, Chair of the Working Group on Sterling Risk-Free Reference Rates, recently stated that our industry needs […]
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| 4-Sep-2018
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Mechanics of FRA Risks |
Managing FRAs and Libor fixings on Swaps is complex. Short-end traders must balance their exposure between the Stub and STIR futures. Stub risk decays with time and changes with LIBOR fixings each day. It must therefore be carefully managed around event risks such as Central Bank meetings. IMM roll dates also result in PnL volatility […]
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| 5-Sep-2018
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MiFID II Best Execution RTS27 – What the Data Shows |
MiFID II Best Execution RTS27, requires Trading Venuesand Systemic Internalisers (SIs) to make public relevant data on the execution quality for financial instruments subject to the trading obligation. This data is published quarterly, with a quarterly lag, so the Best Execution reports for 1Q 2018 are now available from many MTFs, OTFs and SIs. In […]
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| 10-Sep-2018
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Capital and RWAs of top European Banks – 2017 to 2018 |
It is a year since we last looked at the Capital and RWA of European banks, so today I will look at what the past year’s data shows. Background One of the lessons learned from the Great Financial Crisis was that Banks were under capitalised commensurate to their risk exposure; leading to new Basel III […]
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| 11-Sep-2018
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Swaps Data: The race to replace Libor |
My monthly Swaps Review in Risk Magazine discusses Libor and looks at derivatives volumes in the Alternative Reference Rates that have been selected to replace it. I look in detail at SOFR Futures, SONIA and EONIA Swaps. Please click here for free access to the full article on Risk.net.
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| 18-Sep-2018
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ESTER – What You Need To Know |
ESTER will be the European Risk Free Rate (RFR), following an announcement from the European working group. This means that ESTER will replace EONIA (and EURIBOR) as the most important interest rate in Europe. Pre-ESTER data is now available, including volumes. The race starts now to be the first to trade ESTER swaps! What You Need […]
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| 19-Sep-2018
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Default at Nasdaq Clearing |
Last week’s default at Nasdaq Clearing in the power market, generated a lot of press, both because member defaults are few and far between events at CCPs and the fact that it coincided with the ten year anniversary of the Lehman’s bankruptcy. There are few analogies that we can draw between the two events; the […]
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| 26-Sep-2018
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Non-Deliverable Swaps Clearing Volumes |
This year both CME and LCH launched clearing in new Non-Deliverable Swap (NDS) currencies and in today’s article I will look at how volumes in these products have performed. CME – NDS in CLP and COP In May 2018, CME launched Chilean Peso and Columbian Peso NDS as new currencies and both of these have […]
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| 26-Sep-2018
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Could the Nasdaq default happen in Rates markets? |
What could cause a Rates CCP to lose €100m from the Default Fund? We look at 10y IRS in NOK vs SEK. We find that liquidity add-ons prevent very large positions from being under-margined. Nevertheless, we present a scenario that causes a €74m loss. And then we explain why we really shouldn’t worry about it! […]
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| 2-Oct-2018
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Cross Currency Basis and Turn of the Year |
There was a huge move lower of 30 basis points in short-dated cross currency swaps on Thursday September 28th. This is because the “front roll” went over the turn of the year date. There is a huge disconnect for turn of the year pricing between USD Libor and Cross Currency basis. USD overnight interest rates […]
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| 3-Oct-2018
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Should the $8 billion UMR threshold for IM increase to $100 billion? |
ISDA, SIFMA and other trade associations recently published a letter addressed to BCBS and IOSCO, which makes very interesting and important recommendations for the remaining phases of the IM implementation required under Uncleared Margin Rules. (full letter here). Background Uncleared margin rules (UMR) required Phase 1, 2 and 3 firms, with >$3 trillion, >$2.25 trillion […]
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| 9-Oct-2018
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Global Swaps Volume and Market Share in Q3 2018 |
I last looked at the market share of cleared swaps in major currencies in my July article in Risk, which covered the period up to 2Q 2018. In today’s article I will bring that analysis up to date and follow the structure of my start of the year article, 2017 CCP Market Share Statistics. In CCPView we […]
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| 10-Oct-2018
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Derivatives, the Cloud and the source of truth |
As a cloud service provider, we are frequently evaluated by a customer’s IT Security who conduct risk assessments on our Software-as-a-Service’s architecture, security and processes. These assessments are detailed and thorough. Clarus is not the only innovative cloud vendor doing this, we are one of many. The cloud is happening, and it is happening now. […]
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| 15-Oct-2018
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Swaps Data: Sonia growth spreads down the curve |
My monthly Swaps Review in Risk Magazine looks at how: volumes of GBP SONIA Swaps are growing compared to LIBOR Swaps, the maturity profiles that trade for these two products, EONIA and EURIBOR volumes and maturity profiles. Please click here for free access to the full article on Risk.net.
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| 17-Oct-2018
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Scandie Swaps |
We take a look at Scandie swaps through the lens of our data products. SEK are the most traded currency, seeing an average daily volume of $19bn, and a monthly total of $290bn. SEK is the 7th largest cleared currency in IRS trading. The US persons market accounts for around 20% of volumes. There is […]
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| 23-Oct-2018
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CCP Disclosures 2Q 2018 – What the Data Shows |
Clearing Houses 2Q 2018 CPMI-IOSCO Quantitative Disclosures are now available, so lets look at what the data shows, similar to my 3Q 2017 trends article. Background Under the voluntary CPMI-IOSCO Public Quantitative Disclosures by CCPs, over two hundred quantitative data fields covering margin, default resources, credit risk, collateral, liquidity risk and more are published each quarter with a quarterly lag. CCPView has […]
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| 23-Oct-2018
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CLARUS01 Risk Free Rates |
CLARUS01 Are you currently using LIBOR01? What will you do if (when?) Libor is no longer published? We have a simple solution – use CLARUS01 instead. Find it at rfr.clarusft.com. What is CLARUS01? Libor. Risk Free Rates. Benchmark reform. We believe that Interest Rate trading is about to fundamentally change. Clarus want to help during […]
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| 31-Oct-2018
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SOFR Swaps – Block Trades and Fannie Mae Issuance |
We have seen the first SOFR block trade in significant size. Fannie Mae have issued another $5bn of SOFR linked debt this month. SOFR Swaps Are Trading More Frequently Thanks to our SDR Alerts, I get an email every time SOFR or SOFR Basis trades. Over the month of October 2018, the frequency of these emails […]
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| 31-Oct-2018
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Oct 2018 Swaps Review in 15 Charts |
Today I will look at Swaps volumes in the most recent 3 months using the format of my Nov 2017 Swaps Review article. SDR USD IRS price-forming volumes are up 10% USD IRS On SEF Compression volumes are up 50% USD OIS volumes are up 35% EUR, GBP, JPY IRS On SEF Compression volumes at record highs SEF D2C SEF volume growing 42% […]
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| 7-Nov-2018
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15 Million ISINs and Growing |
I last looked into ISINs for Derivatives in my article on MiFID II – Why ISINs for OTC Derivatives are Bad for Transparency, so as we approach the end of year let’s check on what has been happening on this. ANNA-DSB The ANNA Derivatives Service Bureau (DSB) website now provides a lot of interesting information, […]
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| 7-Nov-2018
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SA-CCR for US Banks |
The US is introducing SA-CCR to calculate derivatives exposures in 2020. We look at the consultation. We compare add-ons under SA-CCR and the old CEM methodologies. Clarus offer FREE TRIALS of SA-CCR for Excel. SA-CCR Consultation The Federal Reserve, OCC and FDIC have launched a joint consultation on SA-CCR, the Standardised Approach to Counterparty Credit […]
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| 13-Nov-2018
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Swaps Data: Cleared vs Non-Cleared Margin |
My monthly Swaps Review in Risk Magazine looks at: Initial margin for non-cleared OTC derivatives Initial margin for cleared OTC derivatives Growth rates in each of these Multilateral netting benefits Increasing Clearing Please click here for free access to the full article on Risk.net.
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| 14-Nov-2018
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ISDA SIMM 2.1 – Are You Ready for Implementation? |
ISDA SIMM 2.1 is effective December 1, 2018 Updated with a full re-calibration and industry backtesting Initial Margin will change for all counterparty portfolios Our Customers can check the impact leading up to the effective date And can be confident on implementing SIMM 2.1 on time If you are interested in joining them, we offer free […]
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| 20-Nov-2018
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RFRs – OIS trades are getting longer! |
OIS trading is seeing increasing activity in longer tenors in both USD and GBP. We look at tenor data out of LCH SwapClear to present the volumes in DV01 terms. We find that the amount of long-dated risk traded in 2018 is 2-3 times higher than in 2017. Our series on Risk Free Rates, looking […]
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| 27-Nov-2018
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RFRs – ISDA announce LIBOR fallback methodology |
ISDA have announced a preliminary methodology for Libor fallbacks. This will be the RFR plus a historical spread. This announcement could have a pronounced impact on basis trading. Elsewhere, we have seen continued SOFR trading and the results of the BoE Term Sonia consultation. CLARUS01 already replicates this LIBOR fallback methodology. Risk Free Rates Everywhere […]
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| 4-Dec-2018
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LIBOR Basis Swaps |
For the first time, basis trading reported to the SDRs has topped $1trn in a single month. Similarly, global basis trading has now topped $2trn cleared at LCH SwapClear in a single month. We see that average maturity of basis trades varies according to the indices being traded. Activity in 30y and 50y basis trading […]
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| 5-Dec-2018
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Non-Dealer users of RFRs: The need for term rates |
Over the last year it has become obvious that Libor will not have a long-term future; so why are market participants still writing derivative and loan deals as well as issuing bonds linked to Libor?
Liquidity in markets linked to new benchmarks is gradually increasing but still falls short of dominating Libor-based product.
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| 12-Dec-2018
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What is Left Uncleared in 2018? |
We take a look at the total size of uncleared derivative markets. FX Options are the largest Uncleared market, followed by Swaptions and NDFs. Cross Currency swaps are the fourth largest uncleared market. Around $5.5trn each month trades uncleared – almost equivalent to the US market for cleared IRS. Uncleared Markets The death of uncleared […]
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| 12-Dec-2018
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Eurex Swap Volumes On the Up |
Given the continuing uncertainty around Brexit as the UK government struggles with a parliamentary vote, I thought it was time to re-visit EUR Swap volumes, which I last looked at in early October 2018. I noted then that Eurex market share in the third quarter was 0.96% and little changed from the corresponding quarter a year earlier. […]
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| 19-Dec-2018
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Swaps Data: Volumes Up amid Volatility |
My monthly Swaps Review in Risk Magazine looks at: Cleared Interest Rate Swaps in USD, EUR, JPY Cleared Credit Default Swaps in USD, EUR Cleared Non-Deliverable Forwards Volumes in 3Q18 vs 3Q17 Volumes in Oct-Nov18 vs Oct-Nov17 Growth rates in these periods Please click here for free access to the full article on Risk.net.
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| 19-Dec-2018
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RFRs – CHF SARON Activity |
We noticed that the SNB quoted Clarus data at the most recent CHF SARON working group. We show that Open Interest in SARON now stands at nearly CHF60bn. Most of this is in short-dated products, less than 2 years. We find that 77% of risk is traded in tenors shorter than 2 years. Markets need […]
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| 2-Jan-2019
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Clarus Blogs in 2018: What has been popular? |
For my first blog of 2019, I wanted to reflect on the topics that were popular on the Clarus blog in 2018. Top New Blogs in 2018 Starting with a ranking of the most popular new blogs that we published in 2018. Settle to Market – What you need to know about STM MiFID II […]
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| 4-Jan-2019
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Cross Currency Swaps and RFRs |
The conversation on the use of RFRs (Risk Free Rates) has been developing over the past few months and in this article I will focus on cross currency swaps. The current development of markets in RFRs In most cases the focus has been on single currency swaps where the development of markets based on RFRs […]
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| 9-Jan-2019
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ESTER Term Rates |
We look at the consultation for forward-looking term rates in ESTER. The number of cleared EONIA swaps is surprisingly low, suggesting a transaction-based methodology will be ruled out. A quote-based system is most likely, but this could replicate existing problems we have with EURIBOR. We note that CCP basis also makes the collation of quotes […]
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| 9-Jan-2019
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2018 SEF Market Share Statistics |
In this article I look at 2018 Swap Execution Facility (SEF) market share for Credit, Foreign Exchange and Interest Rate Derivative asset classes, in a similar format to my 2017 SEF Market Share Statistics. A brief summary is that 2018 was a banner year for SEFs, with volumes up in all asset classes and most products […]
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| 15-Jan-2019
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2018 SEF Statistics – LatAm and Asia |
Following my recent article, 2018 SEF Market Share Statistics, I wanted to look into the currencies that I did not have time for in that post; specifically Latin American and Asian. Interest Rate Swaps – LatAm Lets start with the gross notional traded in LatAm currencies in 2018 on all SEFs. MXN by far the […]
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| 16-Jan-2019
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Mechanics and Definitions of Carry in Swap Markets |
We take a look at the cost of carry in Interest Rate Swap trading. We analyse both 2y vs 10y curve trades and a simple spot starting 10y trade. We also take a brief look at exchange traded derivatives to estimate the carry on short-term interest rate futures. Positive carry trades can provide a strong […]
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| 16-Jan-2019
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Title VII 2.0: SEF re-regulation |
More than 10 years after the fall of Lehman Brothers, and with limited changes for several years you might be forgiven for the impression the CFTC is done with SEF regulation. Not so. With a full complement of commissioners recently approved, CFTC has started the Dodd-Frank Title VII re-regulation ball rolling. CFTC has published proposed […]
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| 23-Jan-2019
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Clearing House Disclosures 3Q 2018 – Some Surprises |
Clearing Houses 3Q 2018 CPMI-IOSCO Quantitative Disclosures are now available, so lets look at what the data shows, similar to my CCP Disclosures 2Q 2018 article. Summary: IR Swaps margin decreases for the first time quarter-on-quarter LCH SwapClear Client margin is lower ETD margin is up quarter-on-quarter CME ETD Client margin is higher New disclosures on the default […]
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| 24-Jan-2019
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JPY Swaps – A Market Overview |
JSCC has enjoyed a 63% market share in vanilla JPY IRS versus LCH over the past year. The market shares vary by tenor and month-by-month. JPY OIS trading is a very small market. LCH is the leading CCP in this market with a 67% market share. JPY single currency basis trading remains a large market […]
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| 29-Jan-2019
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2018 CCP Market Share Statistics |
In this article I look at 2018 CCP market share for OTC Derivatives in Credit, FX and Interest Rates, in the same format as I used for my 2017 CCP market share statistics article. Clarus CCPView has daily volume data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparison of market share statistics and I have […]
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| 30-Jan-2019
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Counterparty Risk: Some way to go for Derivatives |
Ten years after the Great Financial Crisis of 2008, we may interpret figures such as only 18% of new trades in OTC interest rate derivatives are now uncleared, to mean that uncleared derivatives now represent a small amount of counterparty risk. However as I will show in this article, this is not true and there […]
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| 5-Feb-2019
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Growth in RFR Markets: Is 2019 the pivotal year? |
I have previously written about the changes to derivative markets and the ways they are accommodating and adjusting to replacing Libor. Trades which reference Libor and other like benchmarks are gradually being replaced with RFR trades across many currencies and products as 2021 draws ever nearer. In this blog I will look at some recent […]
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| 6-Feb-2019
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What Traded Off-SEF in 2018? |
We look at what traded off-SEF in 2018 across Rates markets. As a result of the CFTC’s proposed rule, we look at products that are mandated to clear. We find that most off-SEF volumes are in short-dated FRA and OIS products. For Fixed-Float traded off-SEF, 75% of it is forward starting. Introduction We are always […]
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| 11-Feb-2019
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Swaps Data: SOFR volume and margin insights |
My monthly Swaps Review in Risk Magazine looks at: IBOR benchmark reform CME SOFR Futures SOFR Swaps Uncleared margin rules Swaptions NDF in major ccy pairs Please click here for free access to the full article on Risk.net
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| 12-Feb-2019
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What Traded On-SEF in 2018? |
We look at what traded on- and off-SEF in 2018 across Rates and Credit markets. As a result of the CFTC’s proposed rule, we look at what is voluntarily trading on-SEF at the moment. We find that most voluntary SEF executed volumes are in USD-denominated FRA and OIS products. Liquidity is shown to be very high for SEF-executed, standardised […]
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| 19-Feb-2019
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Test Data for the Cumulative Trivariate Normal Distribution |
Using Java I implemented the double precision algorithm to compute the cumulative trivariate normal distribution found in A.Genz, Numerical computation of rectangular bivariate and trivariate normal and t probabilities”, Statistics and Computing, 14, (3), 2004. The cumulative trivariate normal is needed to price window barrier options, see G.F. Armstrong, Valuation formulae for window barrier options”, […]
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| 20-Feb-2019
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USD Swaps Market vs Futures Market Size |
What is the biggest market in USD Rates? Are futures bigger than swaps? Are cash bonds even bigger? We build on important research from both CME and the CFTC to try to answer those questions. We look at Clarus data to measure the DV01 traded in both swaps and futures in long-end USD Rates. We […]
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| 26-Feb-2019
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FRTB Risk Factor Eligibility Test (RFET) |
In January 2019, the Basle Committee on Banking Supervision (BCBS) revised the 2016 market risk framework, generally known as the Fundamental Review of the Trading Book (FRTB) to address design and calibration issues and to provide further clarification. One of the topics of interest is an improved criteria for the identification of modellable risk factors […]
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| 26-Feb-2019
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Will UMR lead to a further material shift to clearing? |
In my previous post Counterparty Risk: Some Way to Go for Derivatives, I concluded that uncleared OTC counterparty risk is bigger than the 80% cleared traded notional volumes might imply. Of all counterparty risk about two thirds (65%) or more is uncleared and about half (49%) or more is linear delta. A lot is riding […]
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| 27-Feb-2019
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Compression Auctions for RFRs |
At the December 2018 SONIA Working Group, Darrell Duffie (Stanford University), presented a way of compressing existing LIBOR contracts into SONIA contracts. I think it is worth reviewing the suggested methodology. I also put forward a slight alternative that draws heavily on the work of Duffie. This idea is meant for discussion purposes, so please […]
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| 4-Mar-2019
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Is the Leverage Ratio impacting Swaps Trading? |
Is the Leverage Ratio impacting Swaps Trading in Europe? This is a question posted by the authors of a recent ECB Working Paper, “The anatomy of the euro area interest rate swap market“. We provide an overview of the paper and look through the window that it provides into post-trade data in Europe. Executive Summary […]
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| 4-Mar-2019
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RFRs, Cross Currency Swaps and Australian markets |
Cross-currency swap markets are in the process of adapting to a post-Libor environment. New trades will reference the RFRs or risk a complicated process of renegotiating fallbacks (in the case of legacy trades) or incorporating the proposed ISDA fallbacks, when the 2006 ISDA Definitions change. Either way, continuing to reference Libor past 2021 will become […]
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| 12-Mar-2019
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Swaps Data: SOFR Swaps slip, Futures flip |
My monthly Swaps Review in Risk Magazine looks at: Volumes in SOFR Futures SOFR Swaps AONIA and SONIA Swaps Volumes and tenors traded Volumes in EONIA and FedFund Swaps Please click here for free access to the full article on Risk.net.
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| 13-Mar-2019
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KCCP – Clearing is Getting Cheaper |
KCCP defines the amount of capital that must be held versus default fund contributions at a CCP. The lower the value of KCCP, the lower the overall cost of clearing. CPMI-IOSCO public disclosures show that KCCP has decreased at all of the major CCPs in the past three years. We look at the data and […]
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| 20-Mar-2019
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Reducing Counterparty Risk of Uncleared Derivatives |
In my previous posts I concluded that uncleared counterparty risk is bigger than traded notional figures suggest and that, so far, UMR has only driven a limited further shift towards clearing. Here, as promised, I take a spin through approaches which complement new trade clearing and can also improve OTC uncleared counterparty risk efficiency. Summary […]
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| 20-Mar-2019
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LIBOR Fallbacks – What will the GBP spread be? |
We take a look at historic data for SONIA and GBP LIBOR. ISDA’s work on LIBOR fallbacks allows us to look into the potential values of the historic spread. We compare to the forward-looking LIBOR-OIS spreads to the backward looking compounded RFR values. Initial analysis shows that the look-back period will be an important consideration. […]
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| 26-Mar-2019
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€STR – What You Need to Know |
€STR (né ESTER) will be the Risk Free Rate (RFR) for EUR markets. Publication begins 2nd October 2019. The ECB will provide a calculation of the spread between €STR and EONIA. The spread is likely to be around 8.7 basis points. What You Need to Know about €STR (ESTER) Some of our readers may be […]
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| 27-Mar-2019
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Incentives for Central Clearing and the Evolution of OTC Derivatives |
We summarise the recent CCP12 report “Incentives for Central Clearing”. This report looks at the current state of play in Cleared FX, Interest Rates and Credit. It analyses particular niches in clearing, including Latam Rates and NDFs. It concludes that clearing has increased for Linear products, but Option markets remain uncleared. Further studies on legacy […]
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| 2-Apr-2019
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Libor Fallbacks – What will the AUD BBSW Spread be? |
In his recent blog Chris looked at Libor Fallbacks and the GBP Spread, so I thought it would be interesting to look at the spread for AUD. As we know, the first amendments to the ISDA 2006 Definitions are expected in 3rd quarter of 2019 and include fallback changes for GBP, CHF, JPY and AUD. So it is timely to look at the potential spread implications for AUD BBSW, to add to the work done on the GBP Libor.
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| 2-Apr-2019
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USD Swap Spreads Review Q1 2019 |
Swap Spreads, aka Spreadovers, have recently turned negative again in the US. They rebounded back into positive territory fairly quickly. This is against a background of all-time record volumes in USD swaps reported to US SDRs. Should Swap Spreads be at zero versus SOFR after LIBOR disappears? Negative Again In case you missed it, Swap […]
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| 3-Apr-2019
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FXOptions Cleared Volumes Up in Q1 2019 |
FX Options clearing volumes data show a marked jump in Q1 2019 – quadrupling cleared notional outstanding from the end of 2018, unlike IR Swaptions and CDX Swaptions, which show little traction. In this article I will look into the detail of this jump in FX Option volumes. Options Clearing Overview To recap my prior […]
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| 10-Apr-2019
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Swaps Data: Cleared Volumes and CCP Market Share |
My monthly Swaps Review in Risk Magazine looks at: Cleared Volumes and Market Share in Q1 2019, for: IR Swaps – USD, EUR & JPY Credit Default Swaps – USD & EUR FX Non=Deliverable Forwards Compared to both Q4 2018 and Q1 2018. Please click here for free access to the full article on Risk.net.
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| 10-Apr-2019
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ISDA SIMM FX Optimisation and NDFs |
Since Uncleared Margin Rules started to bite in September 2016, traditional NDFs have shifted markedly to clearing in response to UMR (see NDF Volume Data). Deliverable currency NDFs have also experienced dramatic increases but with much smaller clearing percentages. Why the low clearing percentages? Answer: there’s a whole different purpose to these trades. I explain […]
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| 10-Apr-2019
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NOK Rates – NIBOR and NOWA |
I wrote about Scandie swaps in October 2018. In that blog I noted that OIS doesn’t really trade. This hasn’t changed in the interim period – SDRView shows just the occasional DKK OIS trade reported. We did, however, see some SEK OIS cleared at Nasdaq OMX in April via CCPView: Generally, it remains true to […]
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| 17-Apr-2019
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MIFID II Transparency Update |
Back in August 2017 I wrote that “MIFID II Transparency will leave us in the dark“. I didn’t realise at the time how right I would be. As I write this blog as of April 2019, I still feel like transparency is sadly lacking. Could things change in the future? Transitional Transparency Regular readers of […]
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| 17-Apr-2019
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CPMI-IOSCO Quantitative Disclosures 4Q 2018 |
Clearing Houses 4Q 2018 CPMI-IOSCO Quantitative Disclosures are now available, so lets look at what the data shows, similar to my CCP Disclosures 3Q 2018 article. Summary: IM for CDS Clearing shows the highest growth, up 27% YoY IM for IRS and ETD both with decent growth, 9% and 13% YoY Most clearing services with higher IM, a […]
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| 22-Apr-2019
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ISDA SIMM FX Optimisation: The Data and Alternatives |
In my recent post on the same topic, I outlined how deliverable currency FX NDFs are being used to reduce SIMM FX delta, as opposed to a product traded in the usual sense. In today’s article I show the data that underpins my view and consider if NDF delta compression will be a permanent feature […]
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| 24-Apr-2019
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Ameribor: The $1.5bn Index That You Need to Know About |
Ameribor is an index of overnight unsecured lending taking place across the CBOE platform AFX. It is mainly concerned with the interbank market between smaller, regional US banks. We take a look at the rate versus Fed Funds and some possible uses. Introducing Ameribor I will try to do Ameribor justice in this post. But […]
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| 29-Apr-2019
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ISDA Margin Survey 2018 |
Uncleared Margin Rules (UMR) for IM have now been in place for two and a half years The ISDA Margin Survey Year-End 2018 provides a good overview of the regulatory IM received $83.8 billion at Dec 31, 2018, up from $73.7 billion at Dec 29, 2017, an increase of 14% Timeline for Margin Rules The following diagram from the […]
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| 30-Apr-2019
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Indices are the best way to calculate compound interest |
To avoid complications with compound interest calculations, administrators of RFRs could publish a single Index each day. The equivalent term rate for any period could then be calculated by looking up the index level from the start date and the end date of each period. Interim rates do not need to be known. This allows […]
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| 1-May-2019
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SOFR Impacts From Liquidity Spikes |
The Clarus website has a very interesting free service under the LOGIN tab called ‘Term RFRs’. This shows the compounded RFRs for the fixing date (yesterday) looking back overnight, 1, 2, 3 and 6 months for SOFR (USD), SONIA (GBP), TONA (JPY) and AONIA (AUD). This blog will look at the compounded SOFR rates for […]
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| 7-May-2019
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USD SOFR Volumes April 2019 |
Is USD SOFR trading becoming a real thing now? We use CCPView, SDRView and Clarus Microservices to measure activity levels. We find a record amount of risk traded in April 2019 versus SOFR. We also see Compression activity of back-dated trades in SOFR. Read on to find out more details. SOFR Volumes April 2019 You […]
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| 8-May-2019
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Swaps Data: IM grows in Listed and OTC markets |
My monthly Swaps Review looks at the recently published CPMI-IOSCO Quantitative Disclosures by CCPs and highlights: Initial Margin YoY trends for IRS, CDS & ETD Clearing Houses Maximum total VM received on a single-day Estimated Peak Stress Loss on Default Actual largest Credit exposure Please click here for free access to the full article on […]
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| 13-May-2019
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Potential Mechanics of Cross Currency Swaps and RFRs |
As references to Libor declines ahead of 2021 and the use of Risk Free Rates (RFRs) increases, derivatives will have to adapt. So in this blog I will look at the cross-currency swaps and the choices needed to move to RFRs. Cross currency swaps can behave quite differently to single currency swaps and I will […]
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| 14-May-2019
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Portfolio Conversion of Libor to RFR trades |
The closer we get to year end 2021, the more important the question of what will happen to existing LIBOR Swaps when and if LIBOR is no longer published or declared a non-compliant benchmark by the regulator. One approach is ISDA’s work on new Fallback language in the 2006 Definitions (see Libor Fallbacks: What will […]
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| 20-May-2019
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Infrastructure as a Service – the Bedrock of Cloud |
In this blog I will explain the origins and key features of Infrastructure as a Service (IaaS), the core foundations of what we think of as Cloud. Cloud computing is an evolutionary consequence of a sequence of technology innovations, stretching from human based computing, across generations of hardware and networking, to the advent of virtualisation […]
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| 22-May-2019
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Current Clearing Rates |
The death of uncleared markets has been widely over-reported. We look at Clarus CCPView and recent BIS data to look at the size of uncleared markets. Interest Rate derivatives remain the largest, followed by FX. Credit is very small in comparison when measured by notional outstanding. We strongly advocate further transparency into the remaining stock […]
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| 26-May-2019
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PaaS and SaaS – What you need to know |
In my last blog I described the origins of Cloud and highlighted some of the benefits of Infrastructure as a Service (IaaS), but this does not reflect the real value of Cloud. To uncover this, we will explore the concepts of Platform as a Service (PaaS) and Software as a Service (SaaS). Platform as a […]
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| 28-May-2019
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NDF Clearing 2019 |
We update our analysis on NDF Clearing in 2019. We find that 20% of the overall market is now cleared. NDF volumes in Asian currency pairs have rocketed higher. Clearing volumes have reached somewhat of a plateau. Why? NDF Volume Analysis Finding up-to-date analysis on uncleared OTC derivatives is currently a frustrating job. The last […]
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| 4-Jun-2019
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LIBOR Fallbacks Again |
ISDA has launched a second consultation on LIBOR fallbacks. This extends the number of benchmarks covered to eight currencies. The big one this time is USD LIBOR, which is interesting because USD SOFR has a limited history available. Fortunately, the New York Fed has made a proxy USD repo rate available back to 1998. 78% […]
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| 4-Jun-2019
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Migrating to Cloud – An Insider’s Guide |
In earlier blogs we have discovered the agility inherent in Cloud, but how do organisations manage to tap into this, with all their legacy systems? In this blog we will cover the strategy and issues involved in migrating a large systems estate. We will start by assuming foundational Cloud concerns for financial organisations such as […]
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| 5-Jun-2019
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Optimising IM in Swaptions |
Whille writing my recent blogs on FX SIMM IM optimization (here and here), I wondered about progress on the Rates equivalent. I knew swaptions to be key and that Capitalab had focused on them from the get-go and also that Capitalab pipes executions through its affiliated BGC SEF. So, I took at look in SEFView […]
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| 10-Jun-2019
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SONIA and SOFR trading and Term Risk Free Rates |
The use of Risk Free Rates (RFRs) such as SONIA and SOFR continues to grow. Volumes are increasing as described in recent Clarus blogs, see SOFR Volumes April 2019, SARON Activity and Growth in RFR Markets. But the development of a term market in RFRs is still in it’s early stages. Clearing House data shows […]
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| 12-Jun-2019
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Swaps Data: A new era of competition in IR Futures |
The demise of Libor has sett off a battle for market share in futures referencing new risk-free rates. My monthly Swaps Review looks at: The three largest IBOR contracts SOFR Futures market share SONIA Futures market share CME, ICE, CurveGlobal, Eurex Please click here for free access to the full article on Risk.net.
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| 12-Jun-2019
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LIBOR Fallbacks and Uncleared Margin Rules |
LIBOR fallbacks and Uncleared Margin Rules are hot topics across the industry. We highlight the Basel guidance that any amendments to LIBOR contracts as a result of Benchmark reform will not trigger the need to post margin. This is important guidance to ensure the uptake of new RFRs is simple. Two of our big blog […]
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| 17-Jun-2019
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Mechanics and Definitions of Singapore Benchmark Rates (SGD SOR and SGD SIBOR) |
Singapore has unique benchmark interest rates. SOR is an FX-derived synthetic SGD interest rate from FX swaps. SOR will therefore be impacted by changes to USD LIBOR as a result of the latest ISDA consultation. Cross Currency in SGD trades versus the SOR index. Why isn’t the basis therefore zero? Singapore Interest Rates In response […]
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| 18-Jun-2019
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CCP Default Management Auctions |
The Default at Nasdaq Clearing has re-invigorated industry discussions on default management practices and we are now seeing the fruits of these labours. For example CCP12 recently published a CCP Best Practices Paper and LCH published Best Practices in CCP Risk Management. Today I will look at the BIS CPMI-IOSCO “Discussion paper on central counterparty […]
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| 25-Jun-2019
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Types of Cloud – A Primer on the Choices and Challenges |
Cloud is now ubiquitous, but not all clouds are the same. In this blog we will look at the different types of cloud – Private, Public, Hybrid and Multi-Cloud, and think about their suitability and use in financial organisations. Private Cloud Private clouds are facilities created for a single organisation: they may be provided as […]
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| 26-Jun-2019
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Giancarlo looks to rescind CFTC Cross-border overreach |
Following on from his Cross Border Swaps Regulation 2.0 whitepaper from last October, CFTC Chairman Giancarlo gave some updates in his speech at the recent FIA IDX in London . He is leaving the SEF cross-border proposals to be turned into proposed rules and voted on by his successor as Chairman – Heath Tarbert. On […]
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| 2-Jul-2019
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Cloud Security – What you need to consider |
In this article we look at cloud security. With all the hype around Cloud, it’s easy to make assumptions as to what it can do, but security is an area where making assumptions can prove very costly, both financially and reputationally. This blog will look at the cloud security model, security features offered by cloud […]
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| 2-Jul-2019
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SEK STIBOR Reform |
The Swedish Banker’s Association is looking to introduce an Alternative Reference Rate for SEK markets. At the moment, STIBOR is the underlying index for SEK swaps. There are on-going consultations to introduce a Risk Free Rate in Swedish markets. We take a look at the details. SEK Markets Today As it stands today, there are […]
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| 9-Jul-2019
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USD SOFR Volumes June 2019 |
SOFR traded notional hit $50bn in monthly notional for the first time. We take a look at the details of some of the block trades that drove this notional higher. LCH data shows that the amount of risk traded has been between $4m and $10m DV01 during May and June. We show how our data […]
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| 15-Jul-2019
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Term Risk Free Rates from FX Forwards |
The case for a Term Risk Free Rate (TRFR) to support the transition of cash instruments and products has been made by BoE and US ARRC over the past year. The TRFR is defined as a rate known in advance (similar to the current Libors) but based on RFRs in the relevant currency.
But the issue of how to construct an IOSCO-compliant TRFR has been a challenge for market participants and benchmark administrators.
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| 16-Jul-2019
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ARRC Vendor Workshop June 28, 2019 |
The Alternative Reference Rates Committee (ARRC) hosted a vendor workshop recently at the Federal Reserve Bank of New York, which I attended and in this article I cover some of the key points from the workshop. Required SOFR interest rate characteristics Required trade economics and processing for SOFR-based derivatives and cash instruments Compound in arrears […]
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| 22-Jul-2019
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The ‘Dear CEO’ letters – a time to accelerate preparations |
Several regulators and central banks have written to the CEOs of firms in their jurisdictions to emphasise the fact that Libor cessation is very real. In most cases (UK, EU, Switzerland and Australia) a written, often board-approved response is required. In other cases, the response is left open (USA, HK and Singapore) and firms were […]
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| 23-Jul-2019
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A new $50billion threshold for UMR and 1-year extension |
Today BCSB IOSCO put out a press release announcing two significant changes to the UMR timeline: A one-year extension, to Sep-21 for the final UMR implementation phase for firms with > $8 billion of aggregate average notional amount (AANA) of un-cleared derivatives. An new phase for firms with > $50 billion of AANA on the […]
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| 24-Jul-2019
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CPMI-IOSCO Quantitative Disclosures 1Q 2019 |
Clearing Houses 1Q 2019 CPMI-IOSCO Quantitative Disclosures are now available, so lets look at what the data shows, similar to my CCP Disclosures 4Q 2018 article. Summary: IM is up for IRS, CDS & ETD with YoY growth of 6%, 15%, 10% respectively Quarter-on-Quarter IM in CDS was flat ICE Europe F&O and ASX CLF IMs were […]
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| 30-Jul-2019
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CCP Basis – The Cost of Clearing Fragmentation |
Staff Working Paper No. 800 from the Bank of England was published in May 2019. Titled “The Cost of Clearing Fragmentation”, the paper lays out a quantitative process to model the level of CCP basis. We’ll give you a layman’s guide to the paper here and show how our own data from CCPView can be […]
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| 31-Jul-2019
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FXD Counterparty Risk Optimization and Q2 2019 Volumes |
FX Derivatives (FXD) participants face a tricky choice across a patchwork of clearing and uncleared optimization techniques, trading off funding and capital usage with infrastructure spend and operational risk. In earlier posts, we showed you how FX IM optimization via NDFs and FX Options clearing developed in Q1 2019. Here I update the volumes for […]
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| 6-Aug-2019
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CME-LCH Basis narrows to four year low |
Our recent blog, CCP Basis – The Cost of Clearing Fragmentation, proved very popular and while this was published on July 30, 2019, it was actually written a few weeks earlier. As is often the case with these things, there have been major new market developments in the CME-LCH Basis, meaning we need to do […]
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| 7-Aug-2019
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RFR Swaps and Futures Volumes July 2019 |
We recently added an RFR view in CCPView to show volumes and open interest of Swaps and Futures that reference risk free rates (RFRs), covering SOFR, SONIA, SARON and AONIA. Lets look at what the data shows for July 2019 and prior months. SOFR Futures Showing July 2019 a new high at CME with $2.25 […]
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| 12-Aug-2019
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Swaps Data: Fed’s change of tack on rates fuels volume rise |
My monthly Swaps Review looks at Q2 2019 volumes and CCP market share for: USD, EUR, JPY Swaps Credit Default Swaps Non-Deliverable Forwards Please click here for free access to the full article on Risk.net.
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| 14-Aug-2019
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Compression in cleared Inflation Swaps |
Since 2016, uncleared margin rules have driven a steady rise in cleared inflation swaps open interest and CCP IM. In July TriOptima announced their first cleared inflation swap compression run, so let’s look at what data on cleared volumes in CCPView tells us. Inflation swaps in the context of overall IRD volumes Inflation swaps are a somewhat specialised corner of the IRD […]
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| 14-Aug-2019
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USD SOFR Swaps volumes on the up in Aug 2019 |
SOFR Swap trade volumes picked up significantly last week Trade counts in one week were half of the combined May and June totals Outrights were all executed Off SEF and the majority were cleared Basis were all executed on On SEF and were all cleared We show how Clarus Data Products can be used to […]
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| 20-Aug-2019
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‘Dear CEO’ letters – Customer Impacts |
Last month I wrote a blog that described the ‘Dear CEO’ letters sent to many financial firms from regulators in UK, EU, Switzerland, Australia and Hong Kong. Also the US FED has added a Libor component to their regular supervisory requirements to assess the transition from Libor to other benchmarks for firms they supervise. In […]
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| 21-Aug-2019
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USD Fed Funds and the FHLBs |
Get ready to geek out on some short-end USD Rates background. Fed Funds Fed Funds (as I know it), or the more official sounding “Effective Federal Funds Rate (EFFR)”, is a key overnight interest rate for USD. It didn’t quite cut the mustard as the official Risk Free Rate though – that title goes to […]
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| 27-Aug-2019
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FCM Rankings and Concentration – Q2 2019 |
It’s been 18 months since I last looked at FCM rankings, so it’s about time we hit the refresh button. Let’s have a look at the most recent data. Headline Stats Lets start with some headline metrics. First, just a simple count of registered FCM’s, and then counts of FCM’s with any activity in the […]
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| 28-Aug-2019
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SACCR vs CEM Comparisons |
Welcome to my 250th blog for Clarus! That is quite a milestone – I’ve now inflicted nearly a quarter of a million words on our readers. I hope the vast majority have been useful. To celebrate, you will have to suffer a bit of true geekiness. Today we’ll take a look at Regulatory Capital, which […]
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| 3-Sep-2019
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USD SOFR Volumes Aug 2019 |
SOFR Swap trade counts hit a new high in August Outrights and Basis both much higher than prior months Outrights are all Off SEF with a significant portion Uncleared Basis are mostly On SEF (by trade count) TP-ICAP with tpSEF and TraditionSEF vying for top spot 5Y is emerging as the most frequently traded tenor […]
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| 4-Sep-2019
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ESMA: Let’s Get Transparency Right |
Transparency under MIFID II has been a failure so far. ESMA is consulting to put this right. We have already lost three years of transparency. This issue is more important now than ever before as the transition to RFRs demands transparency. I return to work with possibly the most important consultation of the year to […]
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| 4-Sep-2019
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5 Things That Are Making MIFID II Data Useless |
To all of our readers who, like me, are responding to the latest ESMA consultation, I thought I would provide a simple list of ways that MIFID II data is being made difficult to access. Hopefully this can help to get transparency right in Europe. ESMA report that the users of data that they spoke […]
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| 10-Sep-2019
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Swaps Data: Analysing the US rates collapse |
My monthly Swaps Review looks at: USD Swap rates daily moves in 2019 YTD Highlighting the massive falls in August 2019 Putting these into historical context all the way back to 2008 The impact on Initial margin models The impact on CME-LCH-Basis and CCP Switch trades USD Swap volumes in August 2019 Please click here for […]
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| 10-Sep-2019
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Swap Volumes: SOFR v FedFunds |
Back in February 2019, I wrote a blog on the state of the GBP and USD OIS markets. At that time, I held great hope for the USD SOFR markets to develop during 2019 to support a growing market in SOFR-based cash products and the derivatives used to hedge them. This blog looks at the […]
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| 11-Sep-2019
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Four Things to Understand about USD SOFR |
USD SOFR is made up of both general collateral (GC) and non-GC trades. Recent data suggests that there is a difference (a “basis”) between GC and non-GC repo trades. USD SOFR combines Dealer to Dealer and Dealer to Customer trades. Only a limited history of SOFR is available. USD SOFR Components The transactions that make […]
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| 18-Sep-2019
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SACCR vs CEM for FX Products |
Blame our active community of readers if you must. But we’ve had the most requests for a comparison of FX products under SACCR and CEM in response to my original blog. Therefore, here we go… SACCR is Coming If you need a refresher on SACCR and CEM, then please check out our comprehensive coverage below: […]
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| 18-Sep-2019
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CME Swap Data Repository |
Clarus SDRView consolidates all Swap or Trade Data Repositories that publish transaction level data and have meaningful volume. As only the United States and Canada have transaction level public reporting, our focus has been on these jurisdictions, which provide by far the most interesting and useful data. European, Japanese, Australian, Singapore and other jurisdictions have […]
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| 19-Sep-2019
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SOFR Fixed at 5.25%. What happened to the volumes? |
We are all repo traders now. SOFR has been volatile in the past week fixing from 2.20%, 2.43%, 5.25% (!) before back to 2.55% yesterday. We analyse the volumes that make up the fixing and the SOFR IRS volumes. For those that missed it, SOFR fixed at a scarcely believable 5.25% on 17th September. Surrounding […]
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| 25-Sep-2019
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SOFR and FedFunds Rate Comparisons |
SOFR has been topical for over a year as markets become more used to the near-new USD Risk Free Rate (RFR). The ARRC identified SOFR as the preferred replacement for USD Libor in 2017 and has stated: ‘The ARRC has identified the Secured Overnight Financing Rate (SOFR) as the rate that represents best practice for […]
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| 25-Sep-2019
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BIS Triennial Survey 2019 |
Trading reached $6.5trn per day in Interest Rate Derivatives during April 2019. Our markets have grown at unprecedented levels in the past three years. The BIS used our own CCPView data to cross-check the survey results. BIS IRD Volumes in April 2019 The latest BIS survey data is now available. Performed once every three years, […]
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| 2-Oct-2019
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ISDA September 2019 Consultation on Final Parameters |
The final piece of the LIBOR-cessation puzzle is about to be completed. We’ve previously looked at how RFRs can be used to replace a range of ‘IBOR indices. Now we look at the exact parameters that will be used to calibrate the ‘IBOR- RFR spreads. Historic Calibration Market consultations from ISDA have led to the […]
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| 2-Oct-2019
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Tools for IBOR Transition Management |
Today we put out the press release, Clarus Financial Technology releases IBOR Transition Management Tools and in this blog I wanted to provide more details on our offering. Before I do that, another point to note is that we recently authored a whitepaper with our friends at Finastra, titled “IBOR Transition Made Simple“, which is […]
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| 9-Oct-2019
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Swaps Data: Are RFRs on track to replace Libor? |
My monthly Swaps Review looks at: USD SOFR Futures and growth in open interest USD SOFR Swaps outstanding notional GBP Libor and Sonia Swaps Tenor breakdown of Sonia Swaps Sonia Futures growth in open interest Please click here for free access to the full article on Risk.net.
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| 9-Oct-2019
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CPMI-IOSCO Quantitative Disclosures 2Q 2019 |
Clearing Houses 2Q 2019 CPMI-IOSCO Quantitative Disclosures are now available, so lets look at what the data shows, similar to my CCP Disclosures 1Q 2019 article. Summary: Initial Margin for IRS is up 11% in the quarter and 18% in a year IM for CDS and ETD was flat in the quarter and up 12% in a year […]
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| 9-Oct-2019
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NDF Clearing September 2019 |
CFTC data shows a sharp increase in NDF clearing since July this year. September 2019 was a record month for the notional of NDFs cleared. BIS data shows that NDF markets doubled in size between April 2016 and April 2019. Is Phase 4 of the Uncleared Margin Rules accelerating the uptake of NDF clearing? SDRView […]
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| 15-Oct-2019
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CAD Rates Markets and CORRA Reform |
Canadian Rates markets look to be in an especially strong place from a market infrastructure viewpoint. CAD IRS trades versus a term rate, CDOR, which is based on real quotes from six panel banks. The underlying market for CDOR, Banker Acceptances, is a growing market of significant size (CAN$85bn outstanding). Meanwhile, OIS trading vs CORRA […]
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| 16-Oct-2019
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SOFR Swap Volumes – October 2019 |
SOFR vs FF Basis Swaps, a new high in Sep-19 of $19 billion SOFR Outright Swaps, less trades and notional than Aug-19 SOFR Swaps were mostly Off SEF and Cleared For On SEF, tpSEF reported the most trades Oct-19 volumes are shaping up to exceed Sep-19 LCH SwapClear reported $45 billion notional in Sep-19 Clarus […]
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| 22-Oct-2019
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What does SOFR volatility mean for LIBOR Fallbacks? |
SOFR fixings have exhibited an elevated level of volatility in recent weeks. We look at the impact this may have on LIBOR fallback spreads for 1 month USD LIBOR. We use our IBOR Transition Management apps that we recently announced. The data shows that there are sustained periods where the realised spread has been negative, […]
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| 23-Oct-2019
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ISDA SIMM v2.2 – Are you ready? |
ISDA SIMM 2.2 is effective December 1, 2019 Updated with a full re-calibration and industry backtesting Initial Margin will change for all portfolios Our clients can check the impact leading up to the effective date And can be confident on implementing SIMM v2.2 on time If you are interested in joining them, we offer free trials […]
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| 29-Oct-2019
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SONIA Market Volumes – What is Going On? |
SONIA has seen some growth over the past year or so which we expected. Edwin Schooling Latter, Director of Markets and Wholesale Policy at the FCA in January 2019 and Andrew Bailey, Chief Executive Officer at the FCA in July 2019, both commented on the growth of SONIA derivatives markets. In summary the market volume […]
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| 30-Oct-2019
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SOFR Discounting for Cleared Swaps |
CME and LCH propose to change USD Swaps discounting and Price Alignment Interest (PAI) from Fed Funds (EFFR) to SOFR on October 17th 2020. By creating SOFR discounting risk from that date, this change should result in a need to hedge SOFR risk and drive increased liquidity as well as extend the tenors of SOFR Swaps […]
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| 5-Nov-2019
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ISDA SIMM Concentration Thresholds for IR Risk |
We last looked at ISDA SIMM Concentration Thresholds in January 2017, when ISDA SIMM version 1.2 introduced the concept. That blog detailed an Excel implementation of the concentration threshold calculation for interest rate delta risk and proved very popular. The methodology in SIMM v2.2 remains the same, just the thresholds themselves are changed. Today I […]
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| 6-Nov-2019
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What we need to do to fix MIFID II Data |
We attempt an analysis of available MIFID II transparency data. Analysis shows that 89% of notional in vanilla EUR IRS is reported with a four-week delay. We show that at least €800bn of transaction data for vanilla, cleared EUR IRS is missing each week. We estimate that as little as 5% of notional of off-venue […]
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| 12-Nov-2019
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SONIA Term Rates – which is best? |
Four providers have entered the race to provide term SONIA fixings. These terms fixings are intended to ease the uptake of SONIA and made the transition easier for end-user cash markets. The providers are LSEG, ICE, Refinitiv and Markit. We look at their proposals. Looking at the SDR data we find that 80% of SONIA […]
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| 13-Nov-2019
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Eurex Swaps and the DekaBank transfer |
Last week Eurex put out a press release, DekaBank successfully switches swaps book to Eurex Clearing which was interesting enough to make me want to find out what else I could learn about the switch. The public details are that over 7,000 individual transactions were switched from LCH SwapClear to Eurex Clearing in a single […]
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| 18-Nov-2019
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Swaps Data: Clearing Houses and one trillion dollars |
My monthly Swaps Review looks at aggregate disclosures from over 50 clearing services, with details on: Initial margin by house and client Initial margin by product type Default resources, member and own capital Cash resources Stress Loss Margin calls Showing that in aggregate over $1 trillion is held by or available to clearing houses. Please click […]
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| 19-Nov-2019
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Mechanics and Definitions of ISDA IBOR fallbacks |
If an ‘IBOR rate, e.g. USD LIBOR, ceases to publish, we now know the exact methodology that will be used in derivatives contracts to calculate a replacement rate. The calculation uses compounded in-arrears Risk Free Rates, which are decided at a currency level. A spread will be added to these compounded rates, which will be […]
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| 26-Nov-2019
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G-SIB Mechanics and Definitions |
There are 30 Global Systemically Important Banks (G-SIBs) in 2019. A bank must hold at least an extra 1% in Tier One capital as a result of qualifying as a G-SIB. We look at the calculations necessary to work out a bank’s G-SIB score and calculate the exact values for 2019. We estimate that HSBC […]
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| 27-Nov-2019
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SOFR Market Developments |
Last month I wrote about SONIA market developments and how trading is progressing ahead of 2022 when Libor is expected to end. In this blog I extend this analysis to the USD markets. Much like SONIA, SOFR has seen some growth over the past year, which is to be expected as USD Libor is also […]
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| 4-Dec-2019
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G-SIB Scores for US Banks |
We detail the GSIB methodology for US banks, referred to as “Method 2” in the literature. We calculate the GSIB scores for 8 US banks as at December 2018 and September 2019. We find that the Method 2 scores are particularly penal for Morgan Stanley. It will be interesting to see how these scores change […]
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| 4-Dec-2019
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SOFR Futures and Swaps – November 2019 |
Last week we covered SOFR Market Developments covering the comparison of SOFR derivatives volumes vs Libor and FedFunds, which highlighted the massive growth that needs to happen for SOFR to surpass Libor as the primary interest rate reference index. Every firm active in Futures and Swaps should be tracking the uptake of SOFR trading and […]
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| 11-Dec-2019
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Swaps Data: Q3 2019 Clearing Volumes increase |
My monthly Swaps Review looks at Q3 2019 volumes compared to 2018 and CCP market share for: Interest Rate Swaps in USD, EUR, JPY Credit Default Swaps Non-Deliverable Forwards FX Options Please click here for free access to the full article on Risk.net.
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| 11-Dec-2019
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Four Trends in Swaps Data 2019 |
Welcome to a review of Clarus data for 2019. Cleared Rates markets are a $2.7trn-per-day market in 2019. On top of this, Compression accounts for a further $2trn of activity every day. Continued growth in clearing, electronification and compression coupled with a shortening of maturities have been identified by the BIS as key drivers for […]
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| 18-Dec-2019
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Futures and Swaps Volumes and OI in 2019 |
As we get close to year end, it is time to assess the trends in volumes that we have seen in 2019. Usually we do this by looking at the cleared volume in a period (month/quarter) compared to an earlier period, or the open interest (outstanding notional) at a point in time. Today I will […]
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| 18-Dec-2019
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MIFID II Data for Bonds |
Let’s take a look at the European bond market today. I wanted to repeat much of the analysis that I performed for MIFID II post-trade data concerning Interest Rate Swaps. However, I realised that we do not have enough of a complete data set due to a myriad of data access issues. For example, the […]
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| 30-Dec-2019
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How do CNBC Stock Pickers Perform? |
As year end is upon us, we sometimes like to perform some more lighthearted analysis. Many of you will know that the US financial markets are covered well by cable news network CNBC; and I’ve become a fan of the lunchtime “Halftime Report”. At the end of each episode, they typically solicit a handful of […]
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| 31-Dec-2019
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Clarus Top Blogs of 2019 |
For my last blog of the year, I will highlight our top blogs of the year. Top New Blogs in 2019 Starting with a ranking of the most popular new blogs that we published in 2019. Mechanics and Definitions of Carry in Swap markets €STR – What you need to know Ameribor – The $1.5bn […]
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| 8-Jan-2020
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Moving from Libor to SOFR/SONIA – Buyside Considerations |
2020 is shaping up to be an important year for the development of markets in SONIA and SOFR. Recently on 21st November in a speech the FCA outlined plans to accelerate development of SONIA markets during 2020. Although plans are well advanced, the markets are still developing liquidity in longer-dated derivatives. I recently looked at […]
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| 8-Jan-2020
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2019 SEF Market Share Statistics |
In this article I look at 2019 Swap Execution Facility (SEF) market share for Credit, Foreign Exchange and Interest Rate Derivative asset classes, in a similar format to my 2018 SEF Market Share Statistics. A brief summary is that 2019 volumes held onto 2018 volumes, a banner year, in both FXD and IRD but CRD volumes […]
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| 8-Jan-2020
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What You Need to Know about MXN Swaps |
MXN Swaps are the 8th most traded interest rate swap at CCPs. 99% of cleared volumes are at CME, and most MXN swaps are now cleared. MXN swaps are a long-dated market. Almost half of all risk is executed in the 5y and 10y tenors. 66% of MXN swaps are executed on-SEF, but there is […]
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| 14-Jan-2020
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NOK Rates: What You Need to NOWA |
Following on from the surprise entry of our NOK Rates blog in the Top 10 Clarus blogs of 2019, it is high time I updated it with both a look at whether OIS is trading yet and what has happened in the world of NOWA since we last wrote about it in April 2019. And […]
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| 15-Jan-2020
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Swaps Data: Have SOFR and Sonia swaps and futures lived up to expectations? |
My monthly Swaps Review looks at open interest and volume in 2019 for: SOFR Futures at CME and ICE SONIA Futures at ICE, CME, CurveGlobal SOFR Swaps at LCH and CME SARON Swaps at LCH €STR Swaps at LCH GBP Libor and SONIA Swaps at LCH Please click here for free access to the full article on […]
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| 21-Jan-2020
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£700bn SONIA Traded on a Single Day |
SONIA volumes have hit all-time highs in January 2020. The highest volume of SONIA traded on a single day has been £700bn on 15th January. Total monthly volumes will be over £4trn for the first time ever. The spike in activity is concentrated in short-dated instruments, suggesting it is closely related to the BoE meeting […]
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| 22-Jan-2020
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SGX FlexC FX Futures |
In March 2019, just over 8 years after its launch, SGX shut down it’s OTC Financials Clearing business. However SGX continues to innovate and has focused on the futures market. One example of this is the launch of FlexC FX Future, a product which aims to replicate a Non-Deliverable Forward and capture liquidity/volume from the […]
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| 28-Jan-2020
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Will GBP LIBOR stop trading on 2nd March 2020? |
The market convention for GBP Swaps is expected to move to SONIA from Monday March 2nd 2020. This structural change follows an announcement from UK regulators. The data shows that already 88% of total notional in GBP swaps is versus SONIA. Maturities longer than 2 years have still not transitioned to SONIA trading. Probably* as […]
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| 29-Jan-2020
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CCP Quantitative Disclosures 3Q19 – Skin in the Game |
Clearing Houses 3Q 2019 CPMI-IOSCO Quantitative Disclosures are now available, so lets look at what the data shows, similar to my CCP Disclosures 2Q 2019 article. Summary: Initial Margin for IRS is up 17% in the quarter and 45% in a year Each of the four major IRS CCPs increasing IM Client IM is significantly up IM for ETD up […]
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| 3-Feb-2020
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After Libor, will Derivatives become more transparent for end users? |
The move from Libor to Risk Free Rates should accelerate in 2020. We recently published, Will GBP Libor stop trading on 2nd March 2020? and Have SOFR and SONIA Swaps and Futures lived up to expectations? On 16th January 2020, the PRA and FCA published another letter to market participants (in this case SMFs) focused […]
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| 4-Feb-2020
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Risk Free Rates Trading January 2020 |
We look at the percentage of notional and risk that is traded as an OIS swap across six currencies. 55% of GBP trading activity when measured by risk (DV01) is currently transacted versus SONIA (OIS). Just 16% of USD trading activity is transacted as an OIS when measured by risk. AUD markets are leading the […]
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| 10-Feb-2020
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Block Trading |
Our data shows that block trades are 30% larger than the amounts reported to SDRs. Block trades and trades capped at a reporting threshold make up just 7% of volume by trade count. However, the true size of these trades means they account for 43% of notional volume. This varies significantly from currency to currency. […]
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| 12-Feb-2020
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Our Partnership with AcadiaSoft |
Last week we put out a joint press release, see AcadiaSoft Partners with Clarus Financial Technology to Provide Joint Initial Margin Analytics Service and I wanted to provide more detail on the value of this. Background Uncleared margin rules (UMR) require firms to exchange Initial Margin on bi-lateral derivatives exposures and the financial industry relies […]
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| 18-Feb-2020
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Spotlight on RFR Swaps |
As the spotlight turns to RFR Swaps, in a “will they won’t they take off and replace Libor”, we have added new RFR views in most of our data products, to help answer that question. Today I will use SDRView Researcher and our new IBOR-RFR view to shine a spotlight on RFR Swaps. RFR Swaps […]
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| 19-Feb-2020
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Trading RFRs |
Clarus will be talking about trading RFRs at the ISDA/SIFMA AMG Benchmark Strategies Forum 2020 in London next week, February 26th 2020. For more information on the event and to register, please check out the event details page. It is free to attend for the buyside. Among the topics, you will hear our thoughts on: RFR […]
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| 25-Feb-2020
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Block Trades in HKD Derivative Markets |
HKD Interest Rate Derivatives are the 5th most traded APAC currency. They trade in a range of maturities out to 30 years, but the block thresholds and lack of SEF market prevent us seeing the true size of trades. USDHKD FX Options are at least a $750bn per month market. Transparency in this market also […]
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| 26-Feb-2020
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SOFR Swaps and SEF Venues |
We have dedicated Risk Free Rate (RFR) views in most of our data products and today we complete the picture by adding these to SEFView, which aggregates daily volume from all Swap Execution Facilities. Let’s use this to see where SOFR Swaps are trading. D2D Venues The inter-dealer market trades SOFR vs FedFunds Basis Swaps, […]
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| 2-Mar-2020
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SONIA Day – LIVE Blog |
Today has been circled in the calendar for a while now. Monday 2nd March is intended to see a change in GBP swap markets. From now on, the market convention should be to trade SONIA swaps instead of LIBOR. We covered the original announcement in this blog. 19:24 London Final post for this live blog. […]
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| 3-Mar-2020
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‘Dear CEO’ letters to Asset Management Firms |
On the 27th February 2020, the UK FCA wrote to asset management firms to emphasise the need to prepare for LIBOR to likely become unusable after December 2021. This extended previous ‘Dear CEO’ letters from 2018 to major banks and insurers and was designed to ensure firms are well prepared for LIBOR cessation. As we […]
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| 9-Mar-2020
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Swaps Data: Cleared volumes drop for all markets – except FX |
My monthly Swaps Review looks at 4Q 2019 volumes compared to 4Q 2018 and CCP market share for: Interest Rate Swaps in USD, EUR, JPY Credit Default Swaps Non-Deliverable Forwards Please click here for free access to the full article on Risk.net.
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| 11-Mar-2020
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SONIA Update |
70% of GBP risk transacted last week was in SONIA. Just 7.6% of GBP notional cleared at LCH SwapClear was in LIBOR last week. In these extremely volatile markets, much of this activity is due to large amounts of short-dated risk trading. 91% of SONIA risk was in short-dated tenors (2 years and shorter). There […]
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| 11-Mar-2020
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Crashing Rates and Swap Margins |
In observing the markets over the last few weeks there are so many significant moves; Oil prices collapsing by 30% in a day, S&P500 declining 7.6% in a day, the 7th worst move since WW2 and worst since 2008, the whole US Treasury Curve out to 30Y trading below 1% for the first time ever. […]
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| 11-Mar-2020
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Is Transparency Helping Markets Function? |
Trading has continued uninterrupted across the markets that we monitor, despite the extreme levels of volatility we have seen over the past week. Transparency data shows that Rates, Credit and even Funding markets continue to function “normally” in terms of volumes transacted. Crucially, markets have not “seized up” during some crazy price moves. Market participants […]
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| 17-Mar-2020
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Want to know all about Global Systemic Banks? Introducing GSIBView |
GSIBView is the latest data product from ClarusFT. We collect and calculate the GSIB scores for 118 banks. Data shows how GSIB scores and components change over time. Drill-down into components and compare across peer groups. This blog looks at funding data, payments data and derivative notionals of RBS, ICBC and Morgan Stanley. Global Systemically […]
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| 18-Mar-2020
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Cross Currency Swaps Trading During a Crisis |
Cross Currency Swaps trading fundamentally changes during a funding crisis. I run through the impacts to the risks that are being managed and the daily flow of news that drives trading activity. There are various drivers ranging from FX markets, LIBOR fixings, futures convergence trades, central bank operations and client demand. Most traders will only […]
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| 20-Mar-2020
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Mechanics of Central Bank FX Swap Lines |
We detail the trades required to raise USD from a local central bank, using the Fed USD swap lines. We show that the cost of these USD is substantially below that implied from FX markets. The FX haircuts on non-USD collateral for these operations vary between central banks. The largest amounts outstanding in these USD […]
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| 23-Mar-2020
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Crises and Volatility – Trading Challenges |
Over the course of my trading career I have had the ‘opportunity’ to be part of the trading process during market crises, both as a junior trader and as a manager of trading teams. My previous experiences were: 1987 equity crash; 1992 correlation unwinds; 2001 tech bubble burst; and 2008 global financial crisis The one […]
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| 25-Mar-2020
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USD Swap Markets during COVID-19 Pandemic |
Statistical measures show that USD swaps liquidity has deteriorated in the past six weeks. Specifically, price dispersion of 10Y USD swaps has tripled since early February. This is consistent with anecdotal stories in the press. However, we are still seeing higher than typical volumes transacted. Trading may be more difficult, but we are not seeing […]
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| 31-Mar-2020
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Benchmarks in times of high volatility |
Important current benchmarks like LIBOR, other IBORs and ICE SwapRate can have challenging characteristics during periods of high volatility. In some cases, price discovery can be difficult, which can be costly for some users and conversely rewarding for others. In this blog I will look at a few of the current benchmarks and some of […]
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| 1-Apr-2020
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MIFID II Transparency – Can we get it right this time? |
There is a new April 2020 ESMA consultation on the Transparency Regime for OTC derivatives. ESMA are proposing potentially wide-sweeping changes to post-trade transparency in their latest consultation. Deadline for responses is currently April 19th 2020. We encourage all market participants to respond to this vital consultation. We could finally witness the beginning of transparency […]
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| 7-Apr-2020
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Swap Markets see Record Trading Volumes in response to COVID-19 Market Turmoil |
March 2020 saw a flurry of volume records set in interest rate derivatives. The big SEF winners were ICAP, Bloomberg and Tradeweb. Overall, D2D On-SEF volumes for USD IRS hit a new record of ~$1trn. CCPs also saw new combined volume records. Over $50trn was cleared in the top six currencies alone. Over $4.5trn cleared […]
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| 8-Apr-2020
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CCP Quant Disclosures 4Q19 – Default Resources |
4Q 2019 CPMI-IOSCO Quantitative Disclosures for CCPs have just been published and while we are still focused on the Covid-19 pandemic and resulting market volatility, I thought it would be interesting to see what the data shows as of a Dec 31, 2019, before we had any idea what was coming. So a little different to […]
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| 14-Apr-2020
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Swaps Data: How the market responded to Covid-19 |
My monthly Swaps Review looks at USD Swap volumes over the volatile February to March period, covering Daily and monthly volumes for USD IRS and OIS Days with largest 1-day price changes and volumes Prices of trades on March 6th Please click here for free access to the full article on Risk.net.
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| 14-Apr-2020
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Central Bank Responses to COVID-19: FX Swap Arrangements |
We detail the FX Swap lines offered by several central banks to supply their local markets with USD. For the mechanics of how the USD trades work, please see our previous blog. In this blog, we look at the usage of the FX Swap Lines per central bank. Volatility Markets remain in crisis mode. This […]
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| 20-Apr-2020
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What has happened to USD LIBOR Fallback Spreads? |
The fallback spread is an essential component of the LIBOR cessation plan and represents the credit and liquidity component of LIBOR relative to Risk Free Rates (RFRs). In a case where a benchmark like USD LIBOR ceases to publish, fallbacks such as compounded SOFR plus the spread are used to replace the failed benchmark. ISDA […]
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| 21-Apr-2020
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The GSIB Framework and Window Dressing |
What Are GSIBs? If you need a refresher of the GSIB framework, please check-out our blogs on: G-SIB MECHANICS AND DEFINITIONS G-SIB SCORES FOR US BANKS We have recently introduced GSIBView, an app for analysing the scores in more detail. It provides a drill-down into the GSIB components and allows our data customers to analyse […]
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| 28-Apr-2020
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US Treasury Volumes and Market Size |
Post-trade transparency in US Treasuries has arrived. CCPView now includes volumes across US Treasuries, Futures and Swaps. This reveals that the true size of the Rates market in the US is $12.5 Trillion per week in notional equivalents for medium and long-dated interest rate products. We can also monitor the split of trading across different […]
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| 29-Apr-2020
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SFTR Reporting – Public Data |
For some time now I have been noting, but not reading, articles about the Securities Financing Transactions Regulation (SFTR) being implemented in Europe, so today I wanted to take my first look into this regulation. Background The ESMA website has a good section on SFTR Reporting, so I will copy & paste liberally from that, […]
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| 5-May-2020
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CME-LCH Basis Spreads Turn Negative |
We last looked at CME-LCH Basis in August 2019 in CME-LCH Basis Narrows to Four Year Low and as there has been significant volatility in the last few months, high time we looked at this again. Background For Swaps that are economically the same, it is non-intuitive that the fixed rate should be different depending […]
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| 6-May-2020
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How Much Margin? 2019 Edition |
We analyse how much Initial Margin is being held versus derivatives in 2019. This covers cleared and uncleared OTC derivatives, plus exchange traded contracts (Futures and Options). It is difficult to perform the same analysis for Variation Margin. We take a look at the latest ISDA Margin Survey to see if it holds the answers. […]
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| 12-May-2020
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CFTC Block Trading Consultation May 2020 |
Our analysis shows that more blocks transacted than ever before in March 2020. More volume traded as a block on-SEF in March. There is no difference in Price Dispersion between block and non-block trades during both normal and stressed market conditions. The current 15 minute delay in reporting for block trades has no negative impact […]
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| 13-May-2020
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Swaps Data: Record Trading Volumes in March |
My monthly Swaps Review looks at cleared volumes in the most recent 3-month, covering Volumes Feb-Apr 2020 compared to Feb-Apr 2019 Interest Rate Swaps in USD, EUR, JPY Credit Default Swaps FX Derivatives (NDF, FXO) CDS was the standout with almost twice the monthly volume in March 2020, while USD IRS and NDF both achieved […]
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| 18-May-2020
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Cross Currency Swap conventions in an RFR world |
In January 2020, the ARRC published the final recommendations for cross-currency swap conventions. It should be noted that the recommendations are primarily directed towards dealer-dealer trades and the publication points out that dealer-end user trades may require different structures. I have commented previously on potential options in AUD markets and more generally for other currencies. […]
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| 19-May-2020
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Are USD Rates About to Go Negative? |
Over $95bn in Fed Funds swaps have traded at negative rates. The lowest recorded rate so far was close to minus 7 basis points. Swaps all the way out to 3 year maturities have traded in negative territory. When does the market expect negative rates and how large will the cut be? A GIFT! On […]
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| 20-May-2020
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Procyclical margins in the time of Covid-19 |
I recently read an interesting BIS Bulletin, titled “The CCP-Bank nexus in the time of Covid-19”, by Wenqian Huang and Elod Takis (available here), with the following key takeaways: The specific part I am going to focus on today is the third bullet point, “higher margins should be expected but the extent of procyclicality or […]
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| 27-May-2020
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Will GBP Interest Rates go negative in the UK? |
Over £55bn in SONIA OIS swaps have traded at negative rates. The lowest recorded rate so far was close to minus 6 basis points. Swaps all the way out to 4 year maturities have traded in negative territory. When does the market expect negative rates and how large will the cut be? Negative Yields on […]
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| 27-May-2020
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SOFR Futures and Swaps – May 2020 |
Open Interest in both Futures and Swaps is increasing Record volumes in recent months Volumes by CCP or SEF Basis and OIS Swap products Clarus Data Products provide insights Monthly Volumes in 2020 In CCPView we can view both volume and open interest by month. CME ETD with $5.2 trillion of Futures volume in Mar-20, […]
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| 2-Jun-2020
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$300bn FX Swap Rollover |
June sees $295bn of 3 month USD funds provided by central banks expiring. With the Bank of Japan accounting for 50% of the outstanding amounts of these facilities, USDJPY cross currency basis (and FX) will be a focus for these maturing funds. The price differential between the central bank facilities and market-based pricing has shrunk […]
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| 3-Jun-2020
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Backtesting of margin models |
Given the recent increases in initial margin that I covered in a few recent blogs (see Procyclical margins in the time of Covid-19 and Crashing rates and swap margins), I wanted to look into backtesting of margin models. Background Backtesting is a well established practice, widely used by all CCPs to check the adequacy of […]
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| 9-Jun-2020
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ISDA Fallback Spreads – Predicted and Alternative Scenarios |
ISDA continues to make progress towards providing more certainty about the way forward for derivatives post LIBOR. This includes the calculation of the ‘fallback spread’ which is to be applied to the preferred fallback compounding methodology to minimize value transfer when the fallback is triggered. The fallback spread is calculated as the 5-year median difference […]
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| 10-Jun-2020
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What You Need to Know About CNY Swaps |
CNY Swaps are the 9th most traded interest rate swap at CCPs. The market is quite standardised, with 90% of volumes in just three tenors. Clearing is split between Shanghai Clearing and LCH SwapClear. 60% of the market is now cleared. When I took a look at trends in 2019 for swaps market data, I […]
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| 16-Jun-2020
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Every Single Street in the City of London |
As the Covid-19 lockdowns come to an end, I wanted to write something different from the usual and so today I will look back at how I spent some of my free time. Many of us took on new activities and projects; one of mine was to walk every single street in the City of […]
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| 17-Jun-2020
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US Treasury Market Volumes During COVID |
We have started collecting post-trade transparency data for US Treasury trading. I’m sure a lot of market participants have been analysing this data already. Our particular Clarus angle is to compare these UST trading volumes against the rest of the Rates trading landscape – specifically Bond Futures (at CME) and versus cleared Interest Rate Swaps […]
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| 24-Jun-2020
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CME S&P 500 Futures Margins in March 2020 |
In a recent blog, procylical margins in the time of covid-19, I reproduced a chart from a BIS Bulletin showing that IM requirements for US Equity Index Futures doubled during March, the peak of the covid-19 market crisis. Today I will take a detailed look into these margin changes, concentrating on the S&P 500 index. […]
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| 24-Jun-2020
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What Is the Total Size of Rates Markets? |
Rates markets have grown to stand at over $350tn in monthly volumes. Our data product, CCPView, provides transparency data covering 93% of these global volumes on a daily basis. We benchmark our data versus periodic BIS data below. Data analysis needs to be timely and accurate. Contact us today for a CCPView subscription. During recent […]
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| 1-Jul-2020
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LIBOR Discontinuation has been Preannounced |
LIBOR will probably see an announcement towards the end of this year that it will be discontinued. This was announced by the FCA on 22nd June. This has moved markets already because it impacts the dates to be used to calibrate the fallback spreads. This means that we have already seen the last 6 month […]
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| 1-Jul-2020
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SOFR Futures and Swaps – June 2020 |
An update to SOFR Futures and Swaps – May 2020 Volume and Open Interest in SOFR Futures is down Swaps Volume also down, but OI is up US persons data shows activity recovering in June SEF volume remains much lower than Off SEF Clarus Data Products provide more insights Volumes and Open Interest In CCPView we can view both […]
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| 7-Jul-2020
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SONIA Q2 2020 Update |
43% of GBP risk transacted in Q2 2020 was in SONIA. And only 24% of GBP notional was in LIBOR. Now that volatility has died down somewhat there is less short-dated trading activity. Can we consider the market standard as SONIA yet? The first Monday in March 2020 will likely be remembered for many reasons. […]
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| 8-Jul-2020
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Swaps Data: Initial Margin Soars in Q1 2020 |
My monthly Swaps Review looks at Initial Margin requirements as disclosed in the recently published 1Q 2020 CPMI-IOSCO Quantitative Disclosures for CCPs, showing: The extent of the IM increases in Q1 2020 The wide variance by product class 23%, 46%, 66% for IRS, CDS, F&O respectively The wide variance between CCPs in the same product […]
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| 8-Jul-2020
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Clearing House Margin calls in Q1 2020 |
Clearing Houses have recently published data on the magnitude of margin calls they made in Q1 2020 and these are interesting to say the least. Given the massive price volatility we observed in March across all asset classes, we knew these were going to be big numbers, so let’s dive into the detail. Variation Margin […]
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| 15-Jul-2020
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CAD CORRA Futures and Swaps |
We last covered CAD Rates Markets and CORRA Reform in Oct-19, so I wanted to look at what’s new and in particular the news that TMX launches CORRA Futures. Background on CORRA The Bank of Canada took over the calculation and publication of the Canadian Overnight Repo Rate (“CORRA”) on June 15, 2020 , subsequent […]
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| 15-Jul-2020
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Margin Calls During COVID-19 |
John Maynard Keynes said in the 1930s; The market can stay irrational a lot longer than you can stay solvent. Keynes Since March 2020, the bounce-back in almost all “risky” assets since the nadir of the crisis has been breathtakingly sharp: Motivated by Amir’s blog last week on Initial Margin, I got to wondering how […]
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| 21-Jul-2020
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CCP Swap Volumes and Share – 2Q 2020 |
In today’s blog, I look at interest rate swap volumes and CCP market share in major currencies, focusing on 2Q 2020 and comparing QoQ and YoY figures. After the massive volatility and volume we saw in 1Q 2020, the most recent quarter was much quieter. Even so, there are interesting changes in volume and market […]
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| 22-Jul-2020
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Clarus at the CFTC |
Clarus were invited along to the CFTC’s Market Risk Advisory Committee on July 21st, for which we are very thankful. It was a great session, and we hope provided an opportunity to highlight to all market participants how vital transparency was to the smooth functioning of markets during March 2020. We presented on “Rates OTC […]
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| 27-Jul-2020
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€STR Discounting Switch |
I’m sure that I am not the only one sat here wondering how the switch from EONIA to €STR discounting went at the CCPs over the weekend? As far as I understand it, the change in valuation (cash compensation) amounts should have settled on Monday (July 27th) morning. Will this switch lead to activity in […]
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| 28-Jul-2020
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Managing IBOR Transition – Fallback Spreads |
Last month I wrote about the potential for a very non-linear transition when LIBOR is discontinued. This was also covered in a recent Risk article: ‘Beware the cliff edge in Libor fallbacks’. The impending announcement on the timing of LIBOR cessation process was covered by Chris Barnes earlier this month, Also with the potential for […]
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| 29-Jul-2020
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ISDA-Clarus RFR Adoption Indicator |
The ISDA-Clarus RFR Adoption Indicator was at 4.7% in June 2020. This indicator measures the risk-weighted (DV01) percentage of trading activity that takes place in RFR products. Five further sub-indicators have been developed in conjunction with ISDA, providing market participants with granular transparency into RFR activity. Check out the first publication to learn about RFR […]
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| 4-Aug-2020
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ISDA-Clarus RFR Adoption Indicator Analysis – June 2020 |
4.7% of derivatives risk was transacted versus an RFR in June 2020. June 2020 was a record month for the proportion of risk transacted versus SOFR in USD markets. €STR is at the beginning of adoption following the CCP discounting switch last week. JPY TONA sees a significant proportion of risk transacted in longer maturities. […]
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| 5-Aug-2020
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SFTR Public Data |
In April I covered Securities Finance Transaction Reporting (SFTR) and ended that article by stating that I would check back end July for the first set of public reports from Trade Repositories. As there are four authorized Trade Repositories (DTCC, Regis-TR, UnaVista and KDPW), I had expected to look for the weekly data files published […]
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| 11-Aug-2020
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CCP Volumes and Share in CRD and FXD – 2Q 2020 |
I recently looked at CCP Swap Volumes and Share – 2Q 2020 for Interest Rate Swaps, so today I will do the same analysis for Credit Derivatives and FX Derivatives. USD CRD Starting with Credit Derivatives in USD, both Indices and Single-names. 2Q 2020 with $2.65 trillion, up from the $2 trillion in 2Q 2019 […]
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| 11-Aug-2020
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RFR Data: SOFR Sees Record Risk Traded |
The ISDA-Clarus RFR Adoption Indicator has been published for July 2020. The headlines are: The RFR Adoption Indicator was at 6.8% in July 2020. This moved higher from 4.7% the prior month, reaching the highest level since February. Of particular note, 3.8% of all USD risk was traded in SOFR. This was higher than the […]
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| 18-Aug-2020
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YouTube: Markets and COVID-19 |
The presentation that I gave at the CFTC’s Market Risk Advisory Committee on July 21st is now available to view. The section on Derivatives Markets during COVID-19 is well worth a watch, covering content from ourselves, Bloomberg and Tradeweb. Have a click through to watch it all, and make sure to listen to the closing […]
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| 19-Aug-2020
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Calculate your own RFR Adoption Indicators |
The ISDA-Clarus RFR Adoption Indicator provides a set of monthly metrics that firms can use to monitor the progress of RFR trading in IRD markets, both ETD and OTC. In this article, I explain why firms should also calculate RFR Adoption Indicators for their own trading. Background For those of you not yet familiar, below […]
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| 26-Aug-2020
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Valuation challenges for non-cleared derivatives |
The past few months I have been looking closely at the potential for valuations challenges over the last months and days of LIBOR with a potential cliff and wall as we approach December 2021. The rather benign pricing in the market predicts a very gradual ‘glide’ into the end but this may not actually be […]
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| 26-Aug-2020
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US Treasury Quarterly Refunding: Traded Volume Data |
Clarus data for August 2020 shows a big increase in 30Y traded volumes in Rates products. This was specifically in USTs and exchange traded derivatives. Long-dated OTC derivatives did not see the same increase. The 20Y and 30Y US Treasury auctions, as part of the quarterly refunding cycle, were clear drivers of this volume. However, […]
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| 1-Sep-2020
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40% of the GBP Market Trades Versus SONIA |
The ISDA-Clarus RFR Adoption Indicator includes currency specific measures on how much RFR risk is trading. These values are available as interactive charts on rfr.clarusft.com. Notable adoption of RFRs has occurred in both GBP markets (40%) and CHF (8%). We look at each of the six currencies covered by the indicator in this blog. Data […]
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| 7-Sep-2020
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SGD Rates: SORA and the Fallback Rate (SOR) |
A new Fallback Rate (SOR) will be used on SOR-referencing contracts in the event of a cessation of USD LIBOR. This rate should not be used in any new derivatives, and is only expected to be published for a period of about three years. As Clarus highlighted during the original ISDA consultation, the Fallback Rate […]
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| 10-Sep-2020
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RFR Data: Where is the €STR risk? |
The ISDA-Clarus RFR Adoption Indicator has been published for August 2020. The headlines are: The RFR Adoption Indicator was at 6.4% in August 2020. This was pretty unchanged from 6.8% the prior month, and short of the highs hit in January 2020. 3.6% of all USD risk was traded in SOFR vs 3.8% last month, so no great change there. […]
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| 16-Sep-2020
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SOFR Swap Nuances |
This week, we take a look at the world of SOFR swaps and some of the intricacies associated with trading these OIS products. Nuance 1: Reset Lag and Payment Lag (courtesy of the Clarus blog) Overnight Index Swaps have a peculiarity concerning the fixing date (or publication date) of the underlying overnight rates. The fixing […]
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| 23-Sep-2020
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Spreadovers vs SOFR |
LIBOR swaps traded on spread to US Treasury bonds make up about 70% of interdealer liquidity. The floating leg of these swaps is about to be discounted at SOFR. This could lead the Spreadover market to start trading versus the SOFR index itself. We look at the differences between a LIBOR spreadover and a SOFR […]
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| 30-Sep-2020
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Market Share in EUR Swaps |
The recent news that ESMA to recognize three UK CCPs from 1 January 2022, has been well covered in the press e.g. see Reuters. The equivalence decision for a time limited period of 18 months, from 1 January 2021 to 30 June 2022, applies to ICE Clear Limited, LCH Limited and LME Clear Limited. And […]
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| 30-Sep-2020
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New Block Trading Rules for Derivatives |
Amended 7th October 2020 to correct the changes to block and cap thresholds to 67% and 75% respectively. The block threshold for Swaps, and all other OTC derivatives, is changing. The thresholds for trades qualifying for block status and the reporting cap for notional amounts are also diverging. This will substantially increase transparency in the […]
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| 6-Oct-2020
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CME Volumes |
CME volumes have hit $200Trn in some months this year. This is in Interest Rate Derivatives alone. The mix is roughly 60/40 Bond Futures versus Eurodollar futures. CCPView has now introduced volumes measured on a per contract basis, allowing for cross asset class comparisons. Interest Rate Derivatives CME is huge in Interest Rate Derivatives. Just […]
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| 7-Oct-2020
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CCP Quant Disclosures 2Q20 – IM drops |
Clearing Houses 2Q 2020 CPMI-IOSCO Quantitative Disclosures are now available, so lets look at what the data shows. Summary: Initial margin for IRS is down 2% QoQ and up 33% YoY Initial margin for CDS is flat QoQ and up 51% YoY Initial margin for ETD down 13% QoQ and up 58% YoY Most CCPs with lower IM QoQ, as […]
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| 14-Oct-2020
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LCH SOFR Auction Versus The Market |
Update 09:45am EST 15th October. The final size of the LCH SOFR portfolio is now confirmed. It is about 15% smaller than the analysis below, at $9.1m gross DV01. The ISDA-Clarus RFR Adoption Indicator has been published for September 2020. The headlines are: The RFR Adoption Indicator increased to reach close to the January high. It was at 9.5% in […]
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| 16-Oct-2020
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SOFR Live Blog |
Please scroll down/click here for the latest updates. This blog covers both Monday October 19th and Friday October 15th in the SOFR market. LCH SOFR Auction With the LCH SOFR auction now a matter of hours away, we thought it would be worthwhile updating on the activity in SOFR markets. Yesterday was an all-time record […]
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| 20-Oct-2020
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CCP Swap Volumes and Share – 3Q 2020 |
In today’s blog, I look at interest rate swap volumes and CCP market share in major currencies, focusing on 3Q 2020 in a similar format to my 2Q 2020 article. After the massive volatility and volume we saw in Q1 and the quieter Q2, what does the most recent quarter show? Keep reading to find out. USD […]
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| 26-Oct-2020
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SONIA Day 2 – LIVE Blog |
COVID-19 has derailed many plans. One such plan was for interbank GBP swaps trading to move from LIBOR to SONIA on March 2nd. With the market volatility around that date, it just didn’t happen. We covered the subsequent changes in GBP activity here, here and here. The COVID-19 situation isn’t any better right now, but […]
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| 28-Oct-2020
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ISDA SIMM v2.3 – What’s Changed? |
ISDA SIMM v2.3 is effective December 5, 2020 Updated with a full re-calibration and industry backtesting Initial Margin will change for your portfolios The change can be non-material or significantly higher or lower In this article I highlight some of the changes in risk weights However to quantify the actual impact of SIMM v2.3 You need to run […]
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| 4-Nov-2020
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Libor Fallback Trade Valuations – A single trade example |
As the financial industry moves towards the replacement of LIBOR the question asked is changing from what does IBOR Reform mean, to how I manage IBOR reform? A key subsequent question is “What is the change in value/change in risk of my LIBOR trade if it goes onto Fallbacks?” I thought that it would be […]
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| 4-Nov-2020
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Libor pre-cessation announcement – risk challenges for non-cleared derivatives |
In August I looked at the potential for valuation challenges as for non-cleared derivatives. This month I will cover the additional challenges for risk management and reporting that would arise with a pre-cessation announcement. A LIBOR pre-cessation announcement from the FCA could occur by the end of 2020. This was first discussed publicly in June […]
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| 10-Nov-2020
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Swap Volumes in October 2020 |
In the transition from LIBOR to SOFR, the recent change by Clearing Houses to discount swaps using a SOFR curve instead of a FedFunds curve has long been trailed as a key milestone for higher volumes in SOFR derivatives. In today’s blog I look at how SOFR Swap volumes did in October 2020. I also […]
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| 11-Nov-2020
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ISDA-Clarus RFR Indicator: SOFR, So Good |
The ISDA-Clarus RFR Adoption Indicator has been published for October 2020. The headlines are: The RFR Adoption Indicator hit 11.6%, a new all time high. This was up from 10.5% the prior month. 9.7% of all USD risk was traded in SOFR vs 5.8% last month, reflecting the increase in SOFR activity as a result of the CCP discounting change. […]
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| 18-Nov-2020
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SOFR Swaps on SEFs |
Last week I looked at Swap Volumes in October 2020 and focused primarily on SOFR Swaps and Futures at Clearing Houses, so this week I am going to look at Swap Execution Facilities (SEFs). D2D SEFs Let’s start by using SEFView to look at D2D SEFs, where the main product is SOFR v FedFunds Basis […]
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| 24-Nov-2020
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Anonymous Trading on SEFs |
The 1st November 2020 heralded a fundamental change in swaps markets. SEFs executing trades in specific products were no longer permitted to disclose the identities of the counterparties (to each other) after the trade: At the moment, this rule only applies to MAT swaps – i.e. those products subjected to the execution mandate and required […]
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| 1-Dec-2020
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Margin Calls Q2 2020 |
Public disclosures from CCPs reveal the maximum variation margin (VM) called each quarter. In the quarter to June 2020, VM has stayed at elevated levels compared to 2019. VM is running about 34% higher than Q4 2019 and 66% higher than this time last year. Funding daily VM puts complex demands on the industry. Understanding […]
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| 2-Dec-2020
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Will anyone trade LIBOR after 2021? |
US regulators have announced that banks should cease entering into any new contracts referencing USD LIBOR from 31st December 2021. This is consistent with the announcement last week from the UK regulators, who pointed out that LIBOR fixings may be published after end-2021 but that no new business could be written against them. These announcements […]
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| 9-Dec-2020
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GSIBs in 2020 |
The same 30 banks as in 2019 have been defined as GSIBs in 2020. JP Morgan, Wells Fargo and Goldman Sachs have all managed to move into lower tiers, requiring less capital. We look at the data behind the GSIB indicators using GSIBView, our latest data offering. Optimisation of the GSIB metrics is evident in […]
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| 14-Dec-2020
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RFR Trading November 2020 |
The ISDA-Clarus RFR Adoption Indicator has been published for October 2020. The headlines are: The RFR Adoption Indicator was 8.3%, a decline from the previous month (which saw an all-time high). This is the fourth highest reading on record. 5.6% of all USD risk was traded in SOFR vs 9.7% last month, reflecting the impact of the CCP discounting change. The switch to […]
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| 14-Dec-2020
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Libor pre-cessation announcement – how wrong was the market? |
In November I looked at the risk implications of a LIBOR pre-cessation announcement which was widely expected in December 2020. Basis markets such as SOFR/USD LIBOR and SONIA/GBP LIBOR clearly priced the spread to be fixed at the announcement in December (i.e. over the next month or so) and that the fallbacks would take effect […]
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| 21-Dec-2020
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Credit Index Options – Dec 2020 |
Clearing of Credit Index Options is a product to watch in 2021 with recent announcements from both ICE Clear Credit and LCH CDSClear. In early November, ICE launched clearing for Options on CDX NA.IG and CDX.NA.HY In early December LCH CDSClear went live with Options on CDX.NA.IG and CDX.NA.HY To add to those on iTraxx […]
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| 21-Dec-2020
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Toxic FRAs, Fallbacks and Single Period Swaps |
Whilst we continue drafting responses to the pivotal ICE consultation on LIBOR cessation, I have been looking through the data to see how LIBOR cessation is already changing trading behaviour. Away from the global RFR Indicator, which looks at all linear derivatives, there are certain products that have already been affected. Most notably, the FRA […]
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| 30-Dec-2020
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Our Top Blogs and Stats of 2020 |
For our last blog of the year, I wanted to highlight our top blogs and share a few statistics. Top New Blogs in 2020 Starting with a list of the most popular new blogs that we published in 2020. The top three with > 2,000 views each and a total of 30,000 views for the […]
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| 5-Jan-2021
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2020 SEF Market Share Statistics |
In this article I look at 2020 Swap Execution Facility (SEF) market share for Credit, Foreign Exchange and Interest Rate Derivative asset classes, in a similar format to my 2019 SEF Market Share Statistics. Summary: CRD Index, Option and Tranche products Volume in USD up 17% and in EUR up 12% March 2020 a huge month […]
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| 6-Jan-2021
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Cross Currency Swap Review 2020 |
I was fortunate enough to be able to write about Cross Currency Swaps a few times during 2020. At the height of the market turmoil in March and into April, I wrote about: Cross Currency Swaps Trading During a Crisis Mechanics of Central Bank FX Swap Lines Central Bank Responses to COVID-19: FX Swap Arrangements […]
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| 12-Jan-2021
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Cessation of LIBOR: Why is so much new risk still being transacted? |
Q4 2020 saw $7.0bn DV01 of new USD-LIBOR* linked activity written in OTC derivatives markets. It is a similar story in GBP ($4.5bn DV01), JPY and CHF markets. Why is so much new risk being written against these indices when they are due to cease imminently? Responses to the IBA consultation on a possible cessation […]
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| 13-Jan-2021
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2020 CCP Volumes and Market Share in IRD |
In this article I look in detail at the 2020 volumes and market share for OTC Derivatives in Interest Rates reported by Clearing Houses. Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volume and has been used to produce all the charts below. Table of […]
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| 19-Jan-2021
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What’s new in CCP Quant Disclosures – 3Q20? |
Clearing Houses just published their latest CPMI-IOSCO Quantitative Disclosures, which are for the quarter ending 30-Sep-2020, so lets look at what’s new in the data. Initial margin for IRS down 3% from the high on 31-Mar-20 Initial margin for CDS down 7% from the high Initial margin for ETD down 13% from the high Each as expected given the lower price volatility ASX and […]
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| 20-Jan-2021
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3 New Fed Fund Charts You Need to See |
$2.5trn in OIS swaps versus Fed Funds were executed in December 2020. This compares to $364bn for SOFR OIS. We run through the data for the global market, the US market and the basis swap markets. As we continue to compile data for our response to the IBA Cessation of LIBOR consultation, a natural question […]
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| 26-Jan-2021
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New Brexit Rules Move $4Trn Of Derivatives To The US |
Brexit has moved over $4Trn in derivatives out of UK/European execution venues and onto US SEFs. Interdealer volumes in EUR and GBP products executed on US SEFs have increased by ~10 times in 2021. This is a consequence of certain products subject to a Trading Obligation in Europe (and the UK) executing on US registered […]
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| 2-Feb-2021
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US SEFs now have 50% share of EUR iTraxx |
We covered EUR iTraxx very briefly in last weeks blog New Brexit Rules Move $4trn of Derivatives to the US, so today I will take a deeper look into these Credit Index Derivatives volumes. SEF Volumes Using SEFView we can isolate gross notional volumes in EUR Credit Index Derivatives, meaning the iTraxxEurope family. Showing a […]
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| 3-Feb-2021
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Have You Seen This New Idea for Execution Analysis? |
In a quick blog today I summarise a recent report from the FICC Markets Standards Board about execution analysis in our markets. And suggest a potential way forward… The Who? First off, it is worth highlighting the role the FMSB intends to play in our markets: In their own words: The Fixed Income, Currencies and […]
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| 9-Feb-2021
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US SEFs now have 20-40% of European Derivatives |
Following up on our analysis of the Brexit effects on Rates markets and Credit markets we estimate how much of the swaps market is now executing on-SEF. The extent of the move varies from currency to currency and between Interbank markets and their Clients. We look at each market in turn. The Irony The laws […]
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| 15-Feb-2021
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Did You Know That The New Amount of SOFR Risk Hasn’t Changed for 3 Months? |
The latest ISDA-Clarus RFR Adoption Indicator has just been published for January 2021. It is quite incredible how stable it has been recently. The overall Adoption Indicator was again at 10.0%, identical to December 2021. This means that 10.0% of all of the derivatives Rates risk transacted during January 2021was versus a Risk Free Rate. […]
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| 16-Feb-2021
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SOFR Swaptions and CapsFloors are now trading regularly |
We cover SOFR Swaps and other RFRs on a regular basis, so I thought today it would be interesting to see if Swaptions and CapsFloors that reference SOFR are trading. Swaptions Using SDRView, we can search for Swaptions in USD and categorize by reference index. Libor trade counts are in the range 350 to 1,700 […]
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| 23-Feb-2021
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ESG Investments – A first look at the detail |
We have all seen ESG, as in Environmental, Social and Governance, bandied around as a new(ish) buzz word in Finance, so today I wanted to take our first dive into this topic. Background We can define ESG as a set of non-financial factors that are used as criteria to compare a companies impact on the […]
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| 24-Feb-2021
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What is happening now with negative rates in the UK? |
Over £673bn in SONIA OIS swaps have traded at negative rates in 2021. Expectations for negative rates have been severely reduced since the last MPC meeting. This year, swaps as long as 4 years have recorded negative rates. We look at what has traded and current timing expectations. In May of last year, I wrote […]
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| 2-Mar-2021
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SOFR Futures and Swaps – Feb 2021 |
February 2021 was an interesting month in interest rate markets with the volatility in US Treasuries showing up in many products. Today I look at what happened to volumes in derivatives referencing SOFR. Volume and Open Interest in SOFR Futures Volume and OI in SOFR Swaps SOFR Swaps at US SDRs SOFR Swaps on SEFs Clarus Data provides […]
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| 3-Mar-2021
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Here is what is happening to derivatives market liquidity right now |
The price of liquidity in USD swaps has risen in 2021 relative to 2020 when measured by Price Dispersion. However, USD Swap markets saw huge volumes traded during February 2021, showing that liquidity has still been available. Our analysis shows that the price of liquidity has increased as volatility increased. Everyone is talking about the […]
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| 3-Mar-2021
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Monitoring your own RFR Adoption Indicators |
Last summer I wrote Calculate Your Own RFR Adoption Indicators to explain why it was important on IBOR Transition projects to benchmark and monitor your own firms adoption rate versus the market. In a nutshell, your project needs to know if your firm is lagging, leading or in the middle of the pack and respond […]
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| 9-Mar-2021
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Climate Risk Disclosures of major UK Banks |
Following on from the first ESG blog on the Clarus website, see ESG Investments, our second ESG blog takes a look at the Climate Risk Disclosures of major UK Banks. Combining many factors into a single score or rating, which can then be optimized is a common approach in Finance. While we do not want […]
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| 10-Mar-2021
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SONIA is now the Benchmark Rate in GBP Markets |
February 2021 saw 10.6% of all derivatives risk traded versus an RFR. This has now been stable around 10% for some time. We cover the pre-cessation announcements concerning LIBOR and the historic spread calibration that took place last week. There has also been a sharp move higher in the amount of long-dated SONIA risk being […]
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| 17-Mar-2021
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What’s New in USD Rates? |
USD Rates volumes have returned to the levels we saw in March 2020. We look at whether these volumes are being driven by US Treasuries, bond futures or OTC swaps. Clarus provides volume data by tenor for all of these asset classes under a single data subscription. CCPView provides granular data on traded volumes across […]
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| 17-Mar-2021
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ESG Futures – S&P 500 and STOXX 600 |
In my recent article, ESG Investments – A first look at the detail, I noted that two of the major Equity Index Futures contracts, CME S&P 500 and Eurex STOXX 600 have ESG screened variants. In today’s article I look at the volume and open interest of these contracts. CME S&P 500 ESG Starting with […]
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| 24-Mar-2021
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The New Status Quo For Derivatives Markets After Brexit |
Brexit has now moved…. $1.3Trn of EUR and GBP IRS $169bn of EUR ITraxx and $46Trn of SPS and FRAs …onto US-based SEF venues. Barely a day has passed in 2021 without Clarus receiving an enquiry about Brexit. Our data looking at both where trades are executed and where trades are cleared has been in […]
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| 24-Mar-2021
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IR Futures – ADVs and OI in major currencies |
We look at recent Average Daily Volume (ADV) and Open Interest (OI) of the major IR futures: Money Market and Bond Futures AUD, BRL, CAD, CHF, EUR, GBP, JPY and USD Relative size by ADV and OI on a comparable dollar notional basis Trends and market share in SOFR, SONIA and GBP Libor MM Futures […]
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| 31-Mar-2021
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ESG Basics and Fundamentals in Fixed Income |
What role can credit derivatives play in ESG-themed trading strategies? As we continue to explore the ever-expanding world of ESG-linked derivatives, we look at primary market issuance in 2021 and the links with the CDS market. Introduction There are many “beginner guides” to ESG out there. Of the many we’ve trawled through, I suggest checking […]
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| 6-Apr-2021
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LIBOR LIVE – Is GBP LIBOR now dead in derivatives? |
Will today be Day One of the LIBOR end game? It should be, according to the latest “Dear CEO” letter from David Bailey, Sarah Breeden and the FCA: ‘Transition from LIBOR to Risk Free Rates’. The end of Q1 2021 is meant to have signaled the last day for business as usual linear GBP derivatives […]
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| 12-Apr-2021
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Potential challenges of a synthetic LIBOR |
Most active market participants were looking forward to the LIBOR cessation or pre-cessation announcement to provide certainty for the end of LIBOR. This was provided by FCA on 5th March 2021 as a pre-cessation or ‘loss of representativeness’ announcement which triggered many contracts to move to the fallbacks at a future date. However, another component […]
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| 14-Apr-2021
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What’s new in CCP Quant Disclosures – 4Q20? |
Clearing Houses just published their CPMI-IOSCO Quantitative Disclosures, lets look at what’s new: Initial margin for IRS remains close to record highs Initial margin for CDS down 12% from the high Initial margin for ETD down 15% from the high OCC and Eurex OTC IRS the only CCPs with IM QoQ up > 10% ASXCL, ICE Clear NL and ICE Clear SG are new additions to CCPView DTCC […]
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| 14-Apr-2021
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What happened to reduce RFR trading? |
March 2021 saw 8.8% of all derivatives risk traded versus an RFR. This reduced from the previous levels around 10%. The pre-cessation announcements last month do not appear to have accelerated RFR Adoption. There was an increase in the amount of IBOR-related activity last month. Overall for Q1 2021, the total amount of RFR activity […]
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| 21-Apr-2021
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Latest: More EUR Are Trading on-SEF than ever before |
16% of the global EUR D2D swaps market is now on-SEF. This has recently increased above the levels we saw in January 2021. We do not know why there has been another increase in EUR SEF trading. But the data shows it is happening! US venues continue to be the main beneficiaries of Brexit in […]
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| 21-Apr-2021
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Cleared Swap Volumes and Share – 1Q 2021 |
USD IRS with record volume in 1Q 2021, LCH share up YoY SOFR Swaps at new highs, LCH dominant, CME share higher than in IRS EUR IRS volumes up, Eurex share up YoY as it’s gains continue €STR Swaps a record month, LCH dominant, Eurex share higher than in IRS JPY Swaps volumes up, JSCC […]
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| 27-Apr-2021
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You Need To See This SEF Liquidity In RFRs Now |
USD SOFR trading on D2C SEFs is very small, and well behind the industry average. 72% of GBP risk was versus SONIA on D2D SEFs in April 2021. CHF SARON adoption has jumped to 15% on D2D SEFs this month. RFR Adoption Indicators In this blog I turn the RFR Adoption Indicator methodology onto SEF […]
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| 5-May-2021
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Swaption Volumes by Strike Q1 2021 |
USD Swaptions activity hit all time records in March 2021. Driven by the large sell-off in Fixed Income markets, we see particular evidence in 5Y tails of convexity hedging in Swaptions markets. We analyse the activity by strike and underlying (tails). For once, we are playing catch-up here. Chris Whittall over at IFR brought to […]
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| 11-May-2021
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JSCC and CME RFR Adoption Indicators |
A client recently asked us if we had ever calculated our RFR Adoption Indicators for individual CCPs. The answer was a surprising “No” so I thought I should rectify that in today’s blog. This was somewhat motivated by this Risk.net story on JPY this week. The story highlights how different CCP market shares are at […]
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| 11-May-2021
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Archegos, Trade Repositories and Initial Margin |
Amongst the many questions that standout from the huge losses suffered by prime brokers in closing out the positions of Archegos Capital Management, the two that interest me most are, first the lack of transparency of the derivatives (total return swaps) used for these positions and second the in-adequate risk management by the prime brokers. […]
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| 19-May-2021
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New: What caused volumes to decrease in April? |
The latest ISDA-Clarus RFR Adoption Indicator has just been published for April 2021. It saw an increase to 10.1% and it is now back to the levels it has been at for most of 2021. Was March maybe just a blip in the RFR story? Showing; The RFR Adoption Indicator was at 10.1%, higher than last month […]
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| 25-May-2021
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Archegos, APAs and Uncleared Margin Rules |
My recent blog on Archegos, Trade Repositories and Initial Margin, was very popular, so I wanted to do a follow up on the same two topics; transparency of derivatives and initial margin requirements. For those of you not familiar with the three letter acronym, APA, it stands for Approved Publication Arrangement which is a European […]
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| 1-Jun-2021
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CE3 Currencies and Derivatives Clearing |
Did you know that volumes in CZK interest rate derivatives have increased ten-fold in the past five years? CZK is now the largest Rates market amongst CE3 currencies. In the same time-period, HUF cleared markets have actually shrunk. PLN markets have grown by about 50%. Did the expiry of the Exchange Rate Commitment in CZK […]
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| 7-Jun-2021
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JPY TIBOR And RFRs: Is There A New Path? |
A large proportion of JPY swaps activity at JSCC has moved to JPY TIBOR. JPY LIBOR swaps have shrunk from 89% to just 66% of the market. At the same time, overall JPY IRS volumes have drastically shrunk. We look at the data behind cleared JPY IRS markets. A Bloomberg article last week flagged to […]
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| 9-Jun-2021
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USD & EUR Swap Volumes – May 2021 |
USD IRS , OIS and SOFR volumes EUR IRS, OIS and €STR volumes May compared to prior months and 1Q 2021 CCP market share for currency and product CCPView provides transparency on Swap volumes USD IRS From CCPView, USD IRS only, so excluding OIS, Basis, ZC, VNS and FRAs. May with $6.8 trillion, similar to April and down from the high […]
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| 14-Jun-2021
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10.7% of New Risk Traded versus an RFR |
The latest ISDA-Clarus RFR Adoption Indicator has been published for May 2021. It saw an increase to 10.7%, a small increase from last month. When will the big leaps happen? Showing; The RFR Adoption Indicator was at 10.7%. This was higher than last month and very similar to all of the 2021 readings (March aside). USD SOFR decreased to […]
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| 16-Jun-2021
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SOFR SpreadOvers are now starting to trade |
On June 8, the CFTC’s Market Risk Advisory Committee’s (MRAC) Interest Rate Benchmark Reform Subcommittee voted to recommend market best practice for switching interdealer trading conventions from Libor to SOFR (see release 8394-21). Referred to as SOFR First, it is modelled on the UK’s SONIA First and is a prioritization of interdealer trading in SOFR […]
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| 23-Jun-2021
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G3 Inflation Swap Volumes are on the up |
Monthly volumes of cleared inflation swaps topped $500 Billion for the first time in March 2021. That is basically double the monthly volumes that we were seeing as recently as a year ago. This blog will take a look at the volume data available to us. It serves as a great reminder of just how […]
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| 23-Jun-2021
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CCP Disclosures – Skin in the game and Other Metrics |
Clearing Houses publish regular quantitative disclosures of great interest to clearing members and regulators, which provide regular insight into risk governance, ease of comparison and facilitate best practice. From the approximately 200 data fields published for each Clearing Service, it is possible to derive composite metrics, the most well know of which is skin-in-the-game (SITG); […]
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| 29-Jun-2021
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Using the Clarus API to monitor the latest Brexit impacts |
After shouting “HopSchwiiz” in my adopted nation waaaaaay too much at the football last night, I needed a somewhat low-energy blog this morning. Step forward our easy-to-use API, which has recently been extended to include data from both CCPView and SEFView. Hopefully it’s not such a rollercoaster ride using the Clarus API 😛 Brexit Moves […]
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| 7-Jul-2021
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What Is The Outlook for Trading Volumes From Here? |
Clarus CCPView provides insight into volumes across Swaps, Bonds and Futures. We look at the evolution of volumes in different parts of the yield curve. H2 2021 saw some extremely large volumes, with certain tenors showing more activity than in March 2020. Are these elevated volumes here to stay? CCPView includes volumes covering Swaps (OTC […]
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| 14-Jul-2021
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Is RFR Trading Now Ready for Lift-Off? |
We are 12 days from SOFR First. 12 days from the point that interdealer markets plan to switch to trading SOFR instead of LIBOR as the market standard. The CFTC yesterday officially adopted the SOFR First recommendations at the Market Risk Advisory Committee meeting. We are 12 days away from interdealer swaps “prioritising” SOFR first […]
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| 14-Jul-2021
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What’s new in CCP Quant Disclosures – 1Q21 |
Clearing Houses just published their CPMI-IOSCO Quantitative Disclosures, lets look at what’s new: Initial margin for IRS is now down from record highs of Mar 2020 Initial margin for CDS similarly down Initial margin for ETD up QoQ and down YoY Cash Deposited at Central banks continues to increase (ASC, CME, OCC, …) Commensurate drops in marketable collateral convertible to cash LCH Clearnet percentage income from […]
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| 21-Jul-2021
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Clearing Mandates and new Trading Obligations – regulatory change is happening. |
The UK and Europe are currently consulting on both the Derivatives Clearing and Trading Obligations. Clarus are worried that the UK consultations risks a significant loss of transparency to markets. Particularly for USD. There appears to have been silence out of the CFTC on these important subjects. Europe has proposed covering some RFRs in the […]
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| 26-Jul-2021
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SOFR First – LIVE Blog |
Good morning, happy Monday and welcome to SOFR First day! SOFR activity accounted for 18% of the market (18:30pm London time). Today, Monday July 26th, is when a global initiative coined “SOFR First” comes into play for interbank markets. As per the CFTC MRAC announcement two weeks ago: SOFR First represents a prioritization of trading […]
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| 28-Jul-2021
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SOFR First – Day Two |
We covered the first day of SOFR First in our Live Blog on Monday, and today I wanted to take a look at the first two days of SOFR trading. Increase in SOFR Swaps Using SDRView Researcher, we can easily see the increase in SOFR risk traded: From under 4%, we see a jump to […]
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| 4-Aug-2021
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SOFR First – Week One |
SOFR First as a prioritization of interdealer trading in SOFR over LIBOR, recommended that on July 26, 2021 and thereafter, interdealer brokers replace trading of LIBOR linear swaps with SOFR linear swaps. Last week we covered Day One and Day Two of SOFR First, so today I will review week one. Increase in SOFR Swaps In SDRView Res, […]
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| 1-Sep-2021
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August 2021 – What Happened? |
SOFR trading now accounts for 30% of the USD market. This is as a direct result of the SOFR first initiative. Elsewhere, US markets have been in the midst of a Summer lull. Volumes outside of SOFR were around 15% lower than other weeks in 2021. We look forward to updating the ISDA-Clarus RFR adoption […]
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| 8-Sep-2021
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Latest EUR Swaps market share for CCPs and SEFs |
Eurex EUR share stands at 7-9% when measured by DV01. Globally, August 2021 saw the lowest EUR IRS volumes in the past 5 years. 23% of EUR IRS executes on-SEF. 60% of EUR CRD Index volumes now execute on-SEF. And we look at where clearing of EUR CRD Index trades is taking place. Now that […]
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| 14-Sep-2021
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Our Sale to ION |
Following on from our announcement that ION acquires Clarus Financial Technology, I wanted to provide some color on the rationale for the deal and what it means going forward. The Rationale After almost a decade as an independent firm why did we decide to become part of ION Group and more specifically ION Markets? A […]
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| 15-Sep-2021
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RFR trading is now at 50% in CHF and JPY! |
The latest ISDA-Clarus RFR Adoption Indicator presents some truly incredible numbers in August 2021. On to the details. August 2021 The headline RFR Adoption Indicator increased to a new all time high of 17.5% in August 2021. The chart looks particularly healthy: August 2021 was the first month where SOFR First really demonstrated its impact […]
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| 21-Sep-2021
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LIVE BLOG: RFR First in Cross Currency Swaps |
There are some blogs I look forward to writing – this is one of ’em! Circled in our diaries for quite some time has been Tuesday September 21st. This is when the Cross Currency Swaps market is expected to follow the lead of the recent SOFR First initiative and start the transition away from LIBOR […]
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| 28-Sep-2021
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ISDA SIMM v2.4 – Covid Calibration and More |
ISDA SIMM v2.4 is effective December 4, 2021 Updated with a full re-calibration and industry backtesting Including for the first time the Covid-19 Crisis time period Meaning Initial Margin will increase for most portfolio To quantify the actual impact of SIMM v2.4 CHARM can run SIMM v2.4 and v2.3 on your portfolios And do so before go-live, to […]
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| 29-Sep-2021
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SACCR Multipliers, Initial Margin and KCCP |
KCCP defines the amount of capital that must be held versus default fund contributions at a CCP. The lower the value of KCCP, the lower the overall cost of clearing. The SACCR multiplier used to calculate KCCP suggests that KCCP reduces for every extra dollar of Initial Margin posted at a CCP. We look at […]
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| 6-Oct-2021
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Mechanics and Definitions of RFR Cross Currency Swaps |
Cross Currency Swaps exchange a funding position in one currency for a funding position in another currency. Markets have transitioned to trading RFR vs RFR since September 21st 2021 in three major currency pairs. The interbank market continues to trade a resettable floating-floating swap, incorporating a USD cash payment to reset the mark-to-market close to […]
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| 12-Oct-2021
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There Are Now Over 1,000 Clarus Blog Posts! |
The Clarus blog has recently published its 1,000th blog. We run through our early blog posts and highlight some of our most popular posts. The blog had over 500,000 page views in 2020. We are looking forward to the next 500,000. I realised a little too late last week that we have just gone over […]
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| 19-Oct-2021
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SOFR Now 78% of Interdealer Market |
The latest ISDA-Clarus RFR Adoption Indicator shows that RFR trading is really picking up across the board. I know we’ve all been waiting a while for this to happen, but finally the industry seems to be accelerating efforts to transition away from IBORs. September 2021 Overall, we hit a new all time high of 20.3%. […]
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| 20-Oct-2021
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What’s New in CCP Disclosures – 2Q21 |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Initial margin for IRS steady in the range $250-270 billion range for 5 quarters Initial margin for CDS at $58 billion drifting down 3% QoQ and 12% YoY Initial margin for selected ETD at $440 billion up 5% YoY Initial margin increases at OCC, ICE Europe F&O, Eurex OTC IRS, LCH CDSClear, ASX CLF Explanatory Notes are […]
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| 27-Oct-2021
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Cleared Swap Volumes and Share – 3Q 2021 |
USD IRS volumes elevated due to FRA to SPS change SOFR Swaps at record highs EUR IRS volumes flat, Eurex share also flat €STR Swaps a record month JPY IRS volumes down, OIS record, JSCC increasing share over LCH AUD Swaps up QoQ, down YoY, LCH higher share iTraxx Europe, volumes up, ICE Clear Credit […]
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| 3-Nov-2021
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Did The Latest USD Move Really Result In Blood On The Street? |
Disclosure: This blog was written on the BA723 GVA-LHR flight. Well done to BA for making WiFi finally available on European short-haul flights. It is a little more brief than usual, but hurrah to be travelling again. With the Fed “in-session” right now, there has been a decent move higher in short-end USD rates over […]
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| 10-Nov-2021
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SOFR First in Swaptions |
This is not quite our normal “LIVE BLOG” type of announcement for SOFR First in Swaptions (and other non-linear derivatives). I tend to think that Options markets like to make things (unnecessarily?) complicated, and so there are a number of moving parts to look at for SOFR First in USD Swaptions. In Summary November 8th […]
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| 10-Nov-2021
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IM Model Validation for UMR under EMIR – Backtesting |
Last week the EBA published a consultation paper on its its draft Regulatory Technical Standards (RTS) on Initial Margin Model Validation (IMMV) under the European Markets Infrastructure Regulation (EMIR). This is an important and long awaited publication, particularly for the hundreds of firms in the EU that are complying with UMR IM requirements as of Sep 2021 […]
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| 17-Nov-2021
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SOFR Swaptions – Week One Update |
Last week we covered SOFR First in Swaptions and did so the day after the November 8th commencement date. Now that we have more data, let’s look at what this shows. Week One – SOFR Swaptions In SDRView Researcher, we select USD Swaptions and categorize by reference index as IBOR or RFR. Showing that in […]
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| 24-Nov-2021
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Consolidated Tape: Don’t let perfection be the enemy of good for derivatives |
Dutch regulators have today stated with regards to European transparency data: Significant regulatory changes are needed to simplify the current fixed income post-trade deferral regime. Common data standards [are required], to set required data fields, and to agree on data access. Trading venues and APAs [need] to contribute the required data fields and supporting commercial […]
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| 30-Nov-2021
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What is a Consolidated Tape? |
Following on from last week’s blog, I realised maybe I had jumped the gun somewhat. Since the European Commission has now published their report (and a Consolidated Tape for derivatives is included), I thought it worthwhile to take a step back. What actually is a Consolidated Tape and what that might mean for Transparency in […]
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| 1-Dec-2021
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SOFR Swaptions – Month One Update |
We recently covered SOFR Swaptions – Week One Update and SOFR First in Swaptions, and now that we have November volumes, I wanted to update what the data shows. November 2021 – SOFR Swaptions In SDRView Researcher, we select USD Swaptions and categorize by reference index as IBOR or RFR. Showing the jump to 29% of […]
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| 8-Dec-2021
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How Much of the Derivatives Market is Now Cleared? (2021 Edition) |
83% of Interest Rate Derivatives are now cleared according to CFTC data. We use the CFTC data to benchmark our Clarus cleared data and find them to be in agreement. We therefore assume that the CFTC data for uncleared markets is also accurate, opening up more transparency into these important markets. We find that there […]
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| 8-Dec-2021
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IR Futures Volume – Nov 2021 |
I last looked in detail at IR Futures volume in February 2021, so in this blog I will update the Average Daily Volume (ADV) and Open Interest (OI) of the major IR futures: Money Market and Bond Futures AUD, BRL, CAD, CHF, EUR, GBP, JPY and USD Relative size by ADV and OI on a […]
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| 15-Dec-2021
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The $7 Trillion Increase in New RFR Positions |
The RFR Adoption Indicator hit new all time highs in November of 26.3%. 45% of the USD Swaptions market is now traded versus SOFR on IDB SEFs. 100% of the GBP, JPY and CHF XCCY markets vs USD are now traded RFR vs RFR. We have seen a $7Trn+ increase in the Open Interest of […]
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| 21-Dec-2021
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The Latest RFR First Initiative in Cross Currency Swaps |
For my final blog of 2021, permit me a small amount of self indulgence. I will take a look at the Cross Currency Swaps markets and their reactions to the two waves of RFR First that we have had recently. It turns out I will always jump on any excuse to write about Cross Currency […]
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| 4-Jan-2022
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Top Blogs of 2021 |
For our first blog this year, I wanted to highlight our top blogs of 2021 and share a few statistics. Top New Blogs in 2021 Starting with a list of the most popular new blogs that we published in 2021. The top four with > 2,000 views each and a total of 30,000 views for […]
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| 11-Jan-2022
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2021 CCP Volumes and Market Share in IRD |
Details of 2021 volumes and market share for OTC Derivatives in Interest Rates reported by Clearing Houses. Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volumes, as in all the charts below. Contents: USD Swaps (LIBOR, OIS, SOFR) EUR Swaps (EURIBOR, OIS, €STR) GBP Swaps […]
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| 12-Jan-2022
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Deciphering the end of LIBOR in the data |
The final cessation of GBP, JPY and CHF LIBOR will have some impacts on transparency data across our Clarus data. Here are some of the more obvious ones to highlight. We are sure that more will become apparent over the coming weeks: IRS Have Disappeared The most stark representation of the cessation of LIBOR comes […]
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| 18-Jan-2022
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What’s New in CCP Disclosures – 3Q21 |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Initial margin for IRS at $252 billion down 3% QoQ and 4% YoY Initial margin for CDS at $60 billion up 4% QoQ and down 3% YoY Initial margin for selected ETD at $470 billion up 6% QoQ and 13% YoY Initial margin increases at ICE Europe F&O, Eurex OTC IRS, ICE Credit Clear, JSCC IRS Explanatory […]
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| 19-Jan-2022
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What Now for SOFR? |
The ISDA-Clarus RFR Adoption Indicator was published last week, covering December 2021. December saw some notable (!) events, including: Conversion of GBP, JPY and CHF positions into RFRs at major CCPs. Cessation of LIBOR in those three currencies (at the very end of our sample period). Activation of ISDA Fallbacks for any bilateral positions outstanding […]
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| 25-Jan-2022
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2021 SEF Volumes and Share – CRD and FXD |
Today I review 2021 Swap Execution Facility (SEF) volumes and market share for both Credit Derivatives and Foreign Exchange Derivatives, in a similar format to my 2020 SEF Market Share Statistics article. Summary: CRD Index, Option and Tranche products Volume in USD of $7 trillion, down 8% from the prior year Volume in EUR of $4.3 […]
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| 26-Jan-2022
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Mechanics and Definitions of SA-CCR (Part 1) |
SACCR is the Standardised Approach to Counterparty Credit Risk (CRE52 under the consolidated Basel capital framework). It covers calculations for Credit Risk Weighted Assets and exposures under the Leverage Ratio (known as the Supplemental Leverage Ratio, SLR, in the US). It will impact the amount of Tier 1 capital banks must hold. SACCR means that […]
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| 1-Feb-2022
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2021 CCP Volumes and Share in CRD |
A review of Credit Derivatives (CRD) volumes and market share at Clearing Houses (CCPs) in 2021. Index, Single-name and Swaptions Volumes in USD of $10 trillion, down 9% Volumes in EUR of €6.7 trillion or $8.5 trillion, flat on the year Index is 90% in USD and 94% in EUR Single-name is 9% in USD […]
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| 2-Feb-2022
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What is now Trading in RFR Cross Currency Swaps? |
Cross Currency swap trading has transition quickly to USD SOFR and away from USD LIBOR in 2022. All of the currency pairs we look at show evidence of a transition to USD SOFR. Some markets are now trading RFR vs RFR Cross Currency Swaps. Most of the other markets now trade Term domestic rates vs […]
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| 9-Feb-2022
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Big Volumes In Credit And Inflation Plus European Equivalence |
CDS index products are seeing unusually high trading activity. Inflation swaps have also seen significant volumes. These are two hot topics for market participants to monitor. Europe has also extended equivalence for non-European CCPs for another 3 years. There is now a consultation to understand which regulatory actions can most effectively move clearing activity to […]
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| 9-Feb-2022
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The CFTC Monthly Cleared Margin Report |
The Commodity Futures Trading Commission (CFTC) produces a monthly cleared margin report for DCOs (CCPs) required to file daily initial margin with the CFTC’s Division of Clearing and Risk. The report aggregates initial margin from six DCOs: CME, ICE Clear Credit, ICE Clear US, ICE Clear Europe, LCH Ltd and LCH SA. The latest report […]
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| 15-Feb-2022
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What did January teach us about RFR trading? |
The January 2022 ISDA-Clarus RFR Adoption Indicator has now been published. It delivers a few really important lessons about the underlying markets (and data). The headlines include: A virtually unchanged headline adoption rate of 31.9%, versus 31.7% for the previous month. The full time-series is available at rfr.clarusft.com: 99.8% of all new GBP and CHF […]
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| 16-Feb-2022
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BSBY and Term SOFR Swap Volumes |
As we note today in What did January teach us about RFR trading, SOFR Swap and Futures volume hit an all time high of 28.4% of all USD risk traded, which is up 3% from the prior month. CME also put out a press release, noting SOFR Futures and Options record volumes on February 10, […]
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| 22-Feb-2022
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Mechanics and Definitions of SA-CCR (Part 2) |
The Maturity Factor is a key variable in determining bank capital under SACCR. It varies according to the type of margining agreement (CSA) in place. It also varies according to the number and type of underlying derivatives within a netting set. We look at large netting sets, CSAs with hard to value derivatives and settled […]
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| 23-Feb-2022
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SEC Security-Based Swap Repositories are now Live! |
On February 14, 2022, public dissemination of security-based swap transactions under the Securities and Exchange Commissions (SEC) regulations went live. See the statement from Chairman Gary Gensler. Almost 9 years to the day of our first blog, Shining a light on Derivatives, covering the Swap Data Repository (SDR) operated by DTCC for the Commodity Futures […]
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| 2-Mar-2022
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RUB Derivatives Are Still Trading |
Derivatives transparency allows us to monitor the continuing activity in RUB markets. Interest Rate Swap activity in RUB spiked in response to the central bank action this week. And Russia is a component of the CDX.EM CDS index, where trading continues despite huge event risks. FX markets are a little more opaque, but we see […]
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| 9-Mar-2022
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Russia CDS Trades are now showing in SBSDR Data |
CCPView data shows that Open Interest in Russia CDS has decreased 13% from $9.4bn to $8.1bn. Over the same time period, average trade size in Russia CDS has decreased from $8.5m to below $5m. More trades are happening than we have seen previously, with February seeing nearly 1,000 trades. There was a single trade at […]
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| 9-Mar-2022
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RUB NDF Trading Continues |
Following on from our blog last week, RUB Derivatives are still trading, I wanted to take a deeper look at the data for USDRUB Non-Deliverable Fowards. SDRView In SDRView we can look at USD/RUB FX derivatives traded by US persons in the month of February 2022. NDF, by far the largest with 10,939 trades and […]
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| 15-Mar-2022
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SOFR Adoption Hits New Highs |
The RFR Adoption Indicator hit new all time highs in February of 36.3%. Nearly 100% of the GBP, JPY and CHF markets are now traded vs RFRs. SOFR adoption has increased to 33.4% of overall USD Rates risk. The increase in RFR activity has happened in very active markets. February 2022 saw the most amount […]
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| 22-Mar-2022
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SBSDR – Credit Derivative Volumes |
Following on from my blog, SEC Security-Based Swap Data Repositories Are Now Live, and now with 5 weeks of data published, I wanted to take a deeper look at the data for Credit Derivatives. CDS and TRS in USD Let’s start by looking at trades reported to the DTCC and ICE repositories by US persons […]
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| 23-Mar-2022
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STIR Trading Volumes – Will They Recover? |
LIBOR cessation appears to have reduced activity in certain short dated futures markets. CHF and JPY used to see volumes of $1.5Trn per month notional equivalent. But these two markets have seen reduced activity in 2022. However, GBP short term interest rate futures activity has been robust. We outline differences in hedging needs for dealer […]
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| 30-Mar-2022
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The First Cross Cryptocurrency Swap? |
Well this is something! Babel Finance have not only completed what is maybe the first ever cross currency swap in cryptocurrencies, but they even chose to make it a mark-to-market swap! Let’s look into what this transaction is. Disclaimers I think this is my first blog on crypto/defi, so there may be some errors on […]
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| 30-Mar-2022
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FTX’s Direct Clearing Model application to the CFTC |
After a 3-year hiatus it was great to attend FIA Boca again, not only to meet up with customers, contacts and colleagues but also to get a sense of the topics d’jour in Cleared Derivatives. The two that stood out for me were the high profile of Crypto firms and Cloud technology. Cloud, as our […]
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| 5-Apr-2022
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Swaption Volumes by Strike Q1 2022 |
Swaptions activity has reacted to the huge sell off we have seen in Fixed Income markets during Q1 2022. There are no volume records being broken in Swaptions but we update one of our popular blogs from 2021 with fresh data. We take a look at Swaption strikes traded throughout the quarter. And we break-down […]
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| 12-Apr-2022
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SBSDR – A look at Equity Total Return Swaps |
Following on from my blog, SEC Security-Based Swap Data Repositories Are Now Live, I wanted to take a look at Equity Total Return Swap volumes. OTC Equity Derivatives (USD) Let’s start by using SBSDRView to see the products and volumes reported for trades denominated in USD. TRS with @ 70,000 trades on each of Apr 6, […]
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| 13-Apr-2022
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Latest Data Shows SOFR Trading Soaring |
The ISDA-Clarus RFR Adoption Indicator jumped to a new all-time high of 40.5% in March 2022. This has been driven by increased SOFR adoption, hitting a new high of 41.1%. SOFR is now comfortably the largest RFR market. More SOFR risk trades ($11bn DV01) per month than all other RFRs combined. 20.2% of EUR risk traded versus […]
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| 19-Apr-2022
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Have You Seen This 60% Decrease In RUB Derivatives? |
We run through activity in RUB Rates, CDS and FX markets. Data shows that CDS markets are continuing to trade, with 25-30 cleared trades every day. Risk is reducing, with Notional Outstanding in CDS reducing most days. RUB NDFs have seen Notional Outstanding reduce by 60% recently. RUB IRS Markets To start with, I will […]
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| 20-Apr-2022
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What’s New in CCP Disclosures – 4Q21? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Initial margin for ETD at $507 billion is up 8% QoQ and 21% YoY Initial margin for IRS at $261 billion is up 4% QoQ but down 3% YoY Initial margin for CDS at $60 billion is flat QoQ and up 1.5% YoT Initial margin increased significantly at ICE Europe F&O and Eurex OTC IRS Other disclosures […]
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| 27-Apr-2022
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A First Look at Total Return Swaps |
We are now getting our hands dirty with new public transparency data. Amir has covered this in a couple of blogs recently, and I have also used the Russian Federation CDS data from SBSDRs. For this blog, we’ll look in more detail at Total Return Swap data for Equities. What Is a Total Return Swap? […]
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| 27-Apr-2022
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BSBY and Term SOFR Swap Volumes Update |
In Feb 2022, I looked at BSBY and Term SOFR Swap Volumes, so today is an update for March and April. Term SOFR Using SDRView, exporting USD FixedFloat Swaps (so not OIS), filter on Term SOFR Reference Indices. The number of trades in a month increasing from: <10 in Oct 2021 342 in Dec 2021 603 […]
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| 4-May-2022
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Most Actives in CDS Trading |
In our latest data app, SBSDRView, we continue to interrogate the newly available transparency data from the SEC. In my blog last week, I took a first look at Total Return Swaps. Now, let’s take a look at Credit – and specifically single name CDS. What are the most active securities being traded? Using Our […]
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| 10-May-2022
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RFR Adoption increases again but markets see lower volumes |
The ISDA-Clarus RFR Adoption Indicator jumped to a new all-time high of 43.8% in April 2022. This has been driven by increased SOFR adoption, hitting a new high of 47%. SOFR is now comfortably the largest RFR market. More SOFR risk traded ($8bn DV01) last month than all other RFRs combined. 22.8% of EUR risk traded versus […]
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| 11-May-2022
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1Q22 CCP Volumes and Market Share in IRD |
Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volumes. Today we look at 1Q22 Volume and market share for: USD Swaps (LIBOR, OIS, SOFR) EUR Swaps (EURIBOR, OIS, €STR) GBP Swaps (LIBOR, SONIA) JPY Swaps (IBOR, TONA) AUD Swaps (BBSW, AONIA) CAD […]
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| 13-May-2022
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Interest Rate Swaps made easy – What You Should Know |
An Interest Rate Swap (IRS) is a financial derivative that is widely traded. This blog defines an interest rate swap and its practical uses. Why the parties involved would choose to carry out an IRS. What the possible risks of an interest rate swap are. About the Author Jake is 17 years old and studying […]
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| 17-May-2022
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1Q22 CCP Volumes and Share in CRD |
A review of Credit Derivatives (CRD) volumes and market share at Clearing Houses (CCPs) in 1Q 2022. Index, Single-name and Swaptions Volumes significantly higher in 1Q22 than a year earlier USD CDX up 50% and CDS up 37% EUR iTraxx up 80% and CDS 27% ICE Clear Credit 97.5% in USD CDX ICE Clear Credit […]
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| 25-May-2022
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For the first time, we see over $1Trn in Initial Margin |
Total Initial Margin across the industry has now topped $1trn for the first time. Initial Margin requirements across the industry have increased by $725bn since 2016. This drives the need for more optimisation. We look at the data and benchmark the ISDA projections from way back in 2015. Capitolis First this week, a recommendation. No […]
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| 25-May-2022
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Most Active CDS Single-names |
We recently published the blog Most Actives in CDS Trading, which covered the use of our API to access SEC SBSDR transaction data. This included python code to perform look-ups on security identifiers and build a table of the most active names traded in a given period. While simple enough to do for those with […]
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| 30-May-2022
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CDS Data Made Simple |
SBSDRView from Clarus takes transaction level transparency data and makes it simple to use, aggregate and monitor. We look at the most active corporate names in single name CDS trading since records began. We find that a significant portion of activity in concentrated in the Top 10 names, with close to half of all volumes […]
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| 8-Jun-2022
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FX Clearing 2022 |
We look at the growth in cleared volumes across FX products. NDFs now see over $1Trn cleared in a single month. Open Interest has grown significantly in the past two years. NDFs in 8 currency pairs dominate cleared OTC volumes. For those interested in uncleared markets, and particularly FX, it may be interesting to know […]
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| 14-Jun-2022
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Mechanics and Definitions of SA-CCR (Part 3) |
Please note: this is Part Three of a series. Part one of the story for SACCR provided critical background regarding key terms and concepts. Part Two covered the Maturity Factor and how different CSAs and/or treatments of derivatives impact SACCR calculations. We now need to look at how the SACCR calculations unfold in terms of netting. […]
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| 15-Jun-2022
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SOFR is now over half the market |
The ISDA-Clarus RFR Adoption Indicator jumped to a new all-time high of 46.0% in May 2022. SOFR adoption cracked 50% (just!) of the market. 21.8% of EUR risk traded versus €STR, dipping slightly from last month’s all time high. We look at SEF activity in SOFR. The ISDA-Clarus RFR Adoption Indicator for May 2022 has now been published. […]
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| 15-Jun-2022
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What’s New in CCP Quant Disclosures – 1Q22? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Initial margin for ETD at $571 billion is up 12% QoQ and 29% YoY Initial margin for IRS at $269 billion is up 3% QoQ and 7% YoY Initial margin for CDS at $66 billion is up 10% QoQ and 10% YoY LME Disclosures provide insight into the Nickel crisis Other CCP disclosures with record highs Background […]
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| 22-Jun-2022
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Did You Know That SACCR Now Makes FX Trading More Expensive? |
This week I want to pull together two of my recent blogs: FX Clearing 2022 Mechanics and Definitions of SACCR (part 3) I was fully expecting to see a “SACCR effect” on the amount of FX Clearing we see in 2022. Let’s look into the details below. Widening Spreads FX and SACCR have made the […]
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| 28-Jun-2022
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Are Inflation Expectations Becoming Entrenched? The Data. |
With inflation front and centre of everyone’s mind, let’s test a simple hypothesis. If inflation expectations are becoming entrenched – i.e. people expect inflation to be elevated for a longer period – is there evidence of this in trading activity? What evidence might we see? There are two potential signals: More trading activity in Inflation […]
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| 6-Jul-2022
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2Q22 CCP Volumes and Share in CRD |
A review of Credit Derivatives (CRD) volumes and market share at Clearing Houses (CCPs) in 2Q 2022. Index, Single-name and Swaptions Volumes lower in 2Q than 1Q but massively higher than 2Q 2021 USD CDX volumes up 100% in 2Q 2022 than 2Q 2021 ICE Clear Credit with 97.2% share of volume in USD CDX […]
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| 12-Jul-2022
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2Q22 CCP Volumes and Market Share in IRD |
Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volumes. Today we look at 2Q22 Volume and market share in IRD for: USD Swaps (LIBOR, OIS, SOFR) EUR Swaps (EURIBOR, OIS, €STR) GBP Swaps (LIBOR, SONIA) JPY Swaps (IBOR, TONA) AUD Swaps (BBSW, […]
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| 19-Jul-2022
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The latest on RFR Adoption |
The ISDA-Clarus RFR Adoption Indicator recorded another all-time high of 46.4% in June 2022. SOFR adoption was at 49.7% of the market. 23.8% of EUR risk traded versus €STR, a new all time high. June 2022 saw the largest notional ever traded in RFRs, at $86.5Trn. The ISDA-Clarus RFR Adoption Indicator for June 2022 has now been published. […]
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| 20-Jul-2022
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The Endgame for Basis Swaps? |
Interest Rate Basis Swaps can be categorised into two distinct types, with floating sides/legs which reference either: Distinct reference indices e.g. USD Libor 3M vs Fedfunds, or Tenor Basis e.g. USD Libor 3M vs 6M Basis Swaps are used to hedge or trade the basis spread between the reference indices or Libor tenors and are […]
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| 27-Jul-2022
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Cross Currency Volumes head to the moon! |
I keep a close eye on what is going on in Cross Currency Swaps, but somehow I missed quite how significant the past few quarters have been in terms of volumes traded. Let’s take a look. All-Time Record Volumes Taking a look in SDRView shows significant volumes in EURUSD and GBPUSD during 2022: The chart […]
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| 27-Jul-2022
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Most Active Equity Total Return Swaps |
Since our First Look at Total Return Swaps blog, we have added a Most Actives view in SBSDRView. This identifies the most active stocks on which TRS are transacted and below I look at what this data shows. Number of trades The two main derivative products in SBSDRs for Equities are Total Return Swaps (TRS) […]
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| 3-Aug-2022
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Are We In A Summer Lull? |
I take a look at the volume data for July 2022 in CCPView to see whether we have now hit the quiet weeks of summer trading. Cleared OTC Rates Volumes As always, Cleared Rates markets provide a great barometer of overall market activity. They are the largest OTC markets and the most transparent. Showing; Notional […]
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| 10-Aug-2022
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SOFR Futures are now bigger than Eurodollars |
The ISDA-Clarus RFR Adoption Indicator retained its all-time high of 46.4% in July 2022. SOFR adoption hit a new record at 51.7% of the market. 20.3% of EUR risk traded versus €STR, below last month’s all-time high. July 2022 was a relatively quiet month for trading activity, with the total risk traded falling by ~25% from last […]
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| 16-Aug-2022
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Do you know what LIBOR cessation has done to volumes? |
I wanted to follow up on two of our 2022 blogs to estimate the impact on overall volumes in GBP, JPY and CHF markets of LIBOR cessation (which was only 7 months ago, believe it or not!). DECIPHERING THE END OF LIBOR IN THE DATA THE ENDGAME FOR BASIS SWAPS? All of the data in […]
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| 24-Aug-2022
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CDS Volumes now $6.6Trn higher than last year |
Credit Derivative volumes have been huge in 2022. YTD volume data shows that 2022 will likely see all-time record volumes. Volumes are already $6.6Trn larger than at the same point in 2021. We analyse the Cleared market in Index and Single Name CDS. SBSDRView reveals the most active names across uncleared and cleared CDS. We’ve […]
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| 30-Aug-2022
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Microservices to monitor new Inflation data |
Here on the Clarus blog, we anticipated that LIBOR cessation in GBP, JPY and CHF would usher in simpler markets and “easier” trading this year. Less indices, less basis, fewer restructuring requests. Heaven forbid, fewer blogs even! However, 2022 has seen two big market themes step up that have provided plenty to write about – […]
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| 7-Sep-2022
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What is new in GBP Swap Markets? |
We look at vanilla swaps, inflation swaps and futures. Some markets have seen volumes reduce by over 50%. Whilst others recorded all-time record volumes in August 2022. What is driving such different outcomes across a single derivatives market? With Liz Truss the newly anointed Prime Minister, the FT had an interesting take on UK markets […]
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| 14-Sep-2022
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Here Are 6 Things I learnt after writing 400 blogs |
The Numbers If I get the publishing date right, this should come up as my 400th blog for Clarus. We have a mini “leader board” on our website, and you will see that Amir is (just) ahead of me – not for long! Looking at my history on the blog: My very first blog was […]
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| 20-Sep-2022
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RFRs are now half of the market |
The ISDA-Clarus RFR Adoption Indicator has now climbed above 50% for the first time. In August 2022 it hit a new all-time high at 51.1%. SOFR adoption increased to a new all-time high, at 57.2%. GBP and CHF continue to see nearly 100% of risk traded as RFRs. €STR trading slipped (again) to 19.3%, the […]
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| 21-Sep-2022
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What’s New in CCP Quant Disclosures – 2Q22? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Initial margin for ETD at $528 billion is down 7% QoQ and up 19% YoY Initial margin for IRS at $280 billion is up 4% QoQ and 8% YoY, to hit a record high Initial margin for CDS at $76 billion is up 15% QoQ and 31% YoY LME Disclosures that increase in the latest quarter are […]
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| 27-Sep-2022
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The GBP Financial Meltdown – what is still trading? |
GBP markets are exceptionally volatile at the moment. We look at transparency data and find that derivatives markets are continuing to function. September 2022 will likely see the largest notional volumes traded this year. We cannot say for sure that will be the case for the amount of DV01 transacted. We consider what this means […]
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| 28-Sep-2022
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ISDA SIMM – What changes in v2.5? |
ISDA SIMM v2.5 is effective December 3, 2022 Updated with a full re-calibration and industry backtesting Meaning Initial Margin will change for most portfolios In particular, material increases for Commodity and Credit risks To quantify the actual impact of SIMM v2.5 Clarus CHARM can run both SIMM v2.5 and v2.4 on your portfolios And do so before go-live, to […]
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| 5-Oct-2022
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How Kwasi Kwarteng Has Increased Your Initial Margin |
Initial Margin for GBP swaps has increased by up to 65% due to the mini-budget. 5 of the 6 largest ever moves in GBP rates have occurred during September 2022, since the mini-budget. We look at Initial Margin models and how IM has changed over time. It is fair to say that GBP Swap markets […]
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| 5-Oct-2022
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3Q22 CCP Volumes and Share in CRD |
A review of Credit Derivatives (CRD) volumes and market share at Clearing Houses (CCPs) in 3Q 2022. Index, Single-name and Swaptions Volumes in 3Q slightly up on 2Q and significantly up on a year earlier USD CRD volumes up 36% in 3Q 2022 compared to 3Q 2021 EUR CRD volumes up 58% in 3Q 2022 […]
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| 12-Oct-2022
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New RFR Trading Records Everywhere we Look |
The ISDA-Clarus RFR Adoption Indicator has stayed above 50% for the second month. In September 2022 it remained at 51%. SOFR adoption was at 56.6%, the second highest on record. €STR trading increased to 23.5%. Trading activity in RFRs hit all-time records across DV01 and notional amounts traded. The ISDA-Clarus RFR Adoption Indicator for September […]
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| 19-Oct-2022
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3Q22 CCP Volumes and Share in IRD |
Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volumes. Today we look at 3Q22 Volume and market share in IRD for: USD Swaps (LIBOR, OIS, SOFR) EUR Swaps (EURIBOR, OIS, €STR) GBP Swaps (LIBOR, SONIA) JPY Swaps (IBOR, TONA) AUD Swaps (BBSW, […]
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| 26-Oct-2022
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Most Active Names in Credit and Equity Derivatives – Oct22 |
Earlier this summer we looked at the SEC Securities Based SDRs (SBSDRs) for the Most Active Equity Total Return Swaps and Most Active CDS Single-names. Today I will use SBSDRView to look at which names have been most active in October 2022. CDS on Sovereigns Let’s start with the twenty most active sovereigns by trade […]
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| 2-Nov-2022
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Have You Listened to our new Podcast yet? |
The first Clarus podcast is out – please take a listen! Podcasting You may have noticed that we’ve had reason to celebrate a few milestones on the blog over the past year: 1,000 blogs on Clarus 400 blogs for both Chris and Amir With the blog continuing to be well received and well read (even […]
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| 9-Nov-2022
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Rishi Sunak and the impact on GBP Swaps Initial Margin |
In early October we wrote about How Kwasi Kwarteng has increased your Inital Margin, given that so much has happened in the past month, I wanted to update the GBP Swaps initial margin figures in that article. Before we start, two general points, very nicely illustrated by two The Economist covers. On the left, “Reasons […]
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| 9-Nov-2022
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Have you seen the BIS Triennial Survey 2022? |
Trading shrank by about 20% to $5.2Trn per day in Interest Rate Derivatives from April 2019 to 2022. Transition to RFRs has resulted in a $1.4Trn reduction in daily activity in FRAs alone, explaining much of the decline. The BIS survey occurred when markets were likely experiencing a degree of heightened activity, although Clarus data […]
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| 15-Nov-2022
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A New Plateau in RFR Adoption? |
The ISDA-Clarus RFR Adoption Indicator was 51.3% last month. This is the third consecutive month that it has remained around 51%. SOFR adoption hit a new all-time of 58.1%. €STR adoption remains volatile. Trading activity across all markets was lower than last month. The ISDA-Clarus RFR Adoption Indicator for October 2022 has now been published. Showing; […]
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| 21-Nov-2022
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GBP Swaps variation margin in a financial crisis |
We covered the significant increase in initial margin for cleared GBP Swaps in two recent blogs; How Kwasi Kwarteng has increased your IM and Rishi Sunak and the impact on GBP Swaps IM. In the first of those blogs, Chris added a brief section towards the end on variation margin and I wanted to take […]
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| 22-Nov-2022
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What’s New in Term SOFR? |
In April, Amir gave a timely update on Term SOFR. In case you missed it: And the calls from the industry to make Term SOFR a more widely traded derivative have only become louder since, with the latest Risk.net article particularly worth a read: It’s a great article, but it does not update readers on […]
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| 25-Nov-2022
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NDF Clearing – What’s New in 2022? |
There is now over a $1Trn of cleared NDFs traded every month in 2022. March and September 2022 were particularly notable volume months. This is against a backdrop whereby the uncleared NDF market has not really grown. BIS data suggests that over 16% of total NDFs are now cleared across the whole market. This is […]
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| 7-Dec-2022
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The Latest in Aussie and Kiwi Swap Markets |
The end of the year is a traditional time to reminisce. In that spirit, I remember writing my first blog on AUD swap markets from the back of a camper van on the West coast of Oz, after surfing in Yallingup. That experience now feels like a lifetime ago for me personally. Having recently returned […]
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| 13-Dec-2022
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RFR Adoption – Is This Groundhog Day? |
The ISDA-Clarus RFR Adoption Indicator for November 2022 has now been published. Showing; Is History Repeating? Groundhog Day appears to be a traditional film that isn’t actually set at Christmas but is associated with this time of year. RFR Adoption is somewhat similar – in the run up to the end of 2021, it was all […]
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| 20-Dec-2022
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CORRA First in CAD Markets |
I first wrote about benchmark reform in Canada in 2019: Since then, we have had the announcement that CDOR will cease in 2024: As with all good benchmark stories, the announcement of cessation sets the ball-rolling on a number of fronts: CORRA First Luckily, we have a well-thumbed playbook to refer to now, and the […]
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| 20-Dec-2022
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What’s New in CCP Disclosures – 3Q22? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Background Under the CPMI-IOSCO Public Quantitative Disclosures, CCPs publish over two hundred quantitative data fields covering margin, default resources, credit risk, collateral, liquidity risk, back-testing and more. CCPView has 7 years of these quarterly disclosures for 44 Clearing Houses, each with multiple Clearing Services, covering the period from 30 Sep 2015 […]
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| 3-Jan-2023
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Our Top Blogs of 2022 |
For our first blog this year, I wanted to highlight our top blogs of 2022 and share a few statistics. Top New Blogs in 2022 Starting with a list of the most popular new blogs that we published in 2022. The top 5 with > 12,000 views and a total of 25,000 views for the […]
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| 5-Jan-2023
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SDR – Trading Venues and Packages |
Late last year, on Dec 5th, US Swap Data Repositories (SDRs) went live with CFTC’s amended swap data reporting framework (a.k.a CFTC re-write). This incorporates CPMI-IOSCO harmonised data elements (e.g. UTI and UPI) and introduces new data elements. For CFTC Part 43 public dissemination, there are two very interesting new data elements: Let’s look at […]
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| 11-Jan-2023
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Can $62Trn really be about to simply disappear? |
As January slips by, we will shortly be staring at June 30th 2023 when USD LIBOR will finally cease publication. Whilst all signs suggest that LIBOR transition in USD markets will be just as smooth as in GBP, JPY and CHF last year, it is worth just pausing and noting how large the USD LIBOR […]
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| 17-Jan-2023
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2022 CCP Volumes and Market Share in IRD |
2022 volumes and market share for OTC Derivatives in Interest Rates reported by Clearing Houses. Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful analysis and comparisons. Contents: Onto the charts, data and details. Volumes and Market Share For major currencies and regions, vanilla swaps referencing IBORs and […]
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| 18-Jan-2023
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Cross Currency Swap Review 2022 |
With Cross Currency Swap blogs continuing to perform well on the Clarus Blog each year, let’s take a look at what traded during 2022. SDRView Volumes SDRView shows the monthly volumes transacted of Cross Currency Basis swaps. These are, on the whole, the vanilla interbank type of mark-to-market cross currency swaps. Showing; SDRView also shows the DV01 […]
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| 24-Jan-2023
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2022 CCP Volumes and Share in CRD |
A review of Credit Derivatives (CRD) volumes and market share at Clearing Houses (CCPs) in 2022. All the charts and detail from CCPView. CRD by Currency USD CDX, CDS and Swaptions CDX volumes at $12.9 trillion, representing 91% of USD volume with single-name 7.5% and CDXSwaptions volumes six times higher in 2022. USD CRD Index Series […]
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| 25-Jan-2023
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Are Fed Funds the latest winner from benchmark reform? |
This is a follow-up to an RFR Adoption blog that I wrote in November: In that blog, I noted that Fed Funds seemed to be settling at around 10% of the USD market (excluding LIBOR, which continued to print in relatively large size every month in 2022). However, last week I noticed the following Linkedin […]
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| 1-Feb-2023
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SOFR Swaps D2D Volumes and Share |
SOFR Swap Volumes at D2D SEFs Volumes in SEFView reported by D2D SEFs under CFTC Part 16 regulations for last week. Showing that Tradition is the largest with $70 billion, followed by TP at $42 billion and IGDL(ICAP) at $32 billion. However we know that in terms of market share that represents revenue share, these […]
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| 1-Feb-2023
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CORRA First – Clients don’t get it |
CORRA First was put in place on January 9th 2023 to help CAD interest rate derivatives transition from CDOR to CORRA. For all of the juicy details, please see my blog from last year: Transparency is Better Than Ever RFR transition in Canadian markets may seem a little niche for some of our readers. However, […]
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| 7-Feb-2023
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Term SOFR and BSBY Volumes in 2022 |
We looked into Term SOFR and BSBY Swap Volumes in April 2022 and What’s New in Term SOFR in November 2022, so today I will update that blog to see how trade volumes in these reference indices developed in 2022. Term SOFR Swaps In SDRView, I can group USD FixedFloat Swaps by the Reference Index […]
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| 13-Feb-2023
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Why Did SOFR Trading Decrease in January? |
The ISDA-Clarus RFR Adoption Indicator for January 2023 has now been published. Showing; Why The Stasis? Am I becoming a broken record? In the past few weeks, I have written: All of those blogs are very much about the slower than required adoption of RFRs, particularly SOFR, as June 2023 fast approaches. What does this tell […]
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| 15-Feb-2023
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Most Active Names in Credit and Equity Derivatives – Jan2023 |
Late last year I looked at the SEC Securities Based SDRs (SBSDRs) for the Most Active Names in Credit and Equity Derivatives in Oct22, so today I will update that blog for the entity names that were most actively traded in the month of January 2023. CDS on Sovereigns Using SBSDRView, we can find the […]
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| 21-Feb-2023
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Average and Term SOFR Volumes in 2022 |
Recently I looked at Term SOFR and BSBY Volumes in 2022 and in that article I used a pretty loose definition of Term SOFR; basically anything where the index was not the standard overnight SOFR index. My goal being to isolate the trades not using overnight SOFR. Today I want to seperate out the use […]
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| 22-Feb-2023
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Now everyone can understand bank capital requirements |
In January 2022, I wrote about SACCR: Bank Capital. A bank will typically have one of two constraints – either Leverage Ratio or Credit RWAs. This is because a bank has to hold a given pot of capital versus its exposures, and these exposures are not necessarily additive. It simply has to hold enough tier […]
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| 1-Mar-2023
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The Most Popular SOFR Trades |
Transparency data allows us to look at the distribution of risk across the curve. We may be used to seeing activity concentrated in benchmark tenors such as 2Y, 5Y, 10Y and 30Y in US markets, but have SOFR swaps developed in a similar manner? As a starter the ISDA-Clarus RFR Adoption Indicator shows the amount […]
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| 8-Mar-2023
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Clearing Houses are about to convert your USD LIBOR swaps. What do you need to know? |
A crucial step in the final transition to USD SOFR is the physical conversion of outstanding cleared OTC swaps from USD LIBOR to USD SOFR. Clearing Houses (CCPs) provide this as a service to clearing participants and it is a crucial “last step” in the move away from LIBOR. Remember that USD is the last […]
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| 14-Mar-2023
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What’s New in CCP Disclosures – 4Q22? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Background Under the CPMI-IOSCO Public Quantitative Disclosures, CCPs publish over two hundred quantitative data fields covering margin, default resources, credit risk, collateral, liquidity risk, back-testing and more. CCPView has over 7 years of these quarterly disclosures for 44 Clearing Houses, each with multiple Clearing Services, covering the period from 30 Sep […]
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| 14-Mar-2023
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How to Trade A Bank Run |
Much of what is written on this blog stems from the “OG” Financial Crisis back in 2008. Without that, we would not have seen the Dodd Frank Act or post trade transparency in OTC derivative markets. Back in 2008 I was trading cross currency swaps. These were one of the hardest hit instruments as the […]
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| 20-Mar-2023
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Credit Suisse & UBS LIVE Blog |
SBSDRView allows us to track trading in single name CDS: Follow the blog live today to see what the market thinks of the Credit Suisse-UBS deal. We will also be following other banking CDS (Deutsche amongst others….) to monitor any potential contagion. 10:00am CET We have already had the first Credit Suisse CDS trade of […]
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| 22-Mar-2023
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USD Swaps Margin Calls in March 2023 |
I know our readers will have followed the events of the last two weeks, covering Silicon Valley Bank (SVB), First Republic Bank(FRC) and Credit Suisse (CS). Each different institutions, but each faced with massive depositor withdrawals caused by a loss of trust in the soundness of their business. At the start of 2023, who would […]
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| 27-Mar-2023
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Tracking CAD and SGD RFRs |
ISDA and Clarus have now added CAD and SGD RFRs to the currencies we track in the RFR Adoption Indicator. This brings the total number of currencies up to 8: As we approach the end of USD LIBOR it will be interesting to see how other IBOR rates fare. CAD is in the middle of […]
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| 29-Mar-2023
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Deutsche Bank Credit Default Swaps |
One of our readers pointed me to yesterday’s Bloomberg article, “A Single Bet on Deutsche Bank’s Credit Default Swaps is Seen Behind Fridays Rout“, which makes the bold claim that a single CDS trade fuelled a global sell-off on Friday. So in today’s article I will take a look at what the data shows. SEC […]
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| 3-Apr-2023
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I asked ChatGPT to write a Clarus blog. Here is what happened…. |
I am travelling in APAC this week so I could do with a helping hand on the blog-writing front. SACCR is our most popular topic on the blog, so as the title says, I asked ChatGPT to help out. If you are not familiar with ChatGPT (where have you been?) you can check out this […]
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| 4-Apr-2023
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Synthetic USD Libor Annoucement |
A short blog today to highlight the recent Financial Conduct Authority (FCA) decision on synthetic USD Libor. As all our readers will know, USD Libor is set to end on 30-June-2023, at which point “panel banks” will stop contributing rates to ICE Benchmark Administration (IBA). So let’s summarize the recent FCA decision: There you have […]
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| 12-Apr-2023
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1Q23 CCP Volumes and Share in IRD |
Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volumes. Today we look at 1Q23 Volume and market share in IRD for: Onto the charts, data and details. Volumes and Market Share For major currencies and regions, vanilla swaps referencing IBORs and OIS […]
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| 18-Apr-2023
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The Eurodollar is no more… |
Whilst ostensibly this blog is about the March 2023 edition of the ISDA-Clarus RFR Adoption Indicator, I cannot let pass the disappearance of the largest futures contract that I ever traded without comment. A huge part of the Clarus blog in recent times has been focused on the transition away from IBORs and into RFRs. […]
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| 19-Apr-2023
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1Q23 CCP Volumes and Share in CRD |
A review of Credit Derivatives (CRD) volumes and market share at Clearing Houses (CCPs) in 1Q 2023. All the charts and detail from CCPView. CRD by Currency So 7% decreases in both USD and EUR from a year earlier. USD CDX, CDS and Swaptions CDX volumes in 2023Q1 were 90% of USD volume, single-name CDS 9% […]
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| 24-Apr-2023
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There is a new MAT Filing! |
Made Available to Trade Let’s do a poll to kick things off. Before you clicked on this blog, did you know that there had been a new MAT filing? I’m betting that most of our readers were well aware. The MAT filing, from Tradeweb, received decent press coverage, including from Risk: What Is It? A […]
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| 3-May-2023
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Fast Valuation of Seasoned OIS Swaps |
OIS swaps have coupons determined by compounded daily interest rates settled every few months. The valuation of future coupons is computationally similar to the valuation of a LIBOR payment, in that the valuation involves the ratio of two discount factors associated with the start and end of the accrual period. A problem can arise on […]
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| 3-May-2023
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CME converted your Eurodollars. This is what happened next. |
This is an interesting journey through the data for those of you interested in what happened following CME’s conversion to SOFR for Eurodollar contracts (April 14th 2023) and the first USD conversion of LIBOR swaps at CME to SOFR (April 21st 2023). Eurodollars The once mighty Eurodollar contract is no more. (If you didn’t already […]
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| 10-May-2023
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Is Now The Time to Optimise Your Initial Margin? |
Initial Margin ISDA have just published the latest edition of the “ISDA Year-End Margin Survey”: We have covered previous versions of this survey, which are always worth a re-read because you can laugh at any predictions we made in the past! Sifting through all of those reveals that between $650-800bn in extra IM was anticipated by ISDA […]
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| 10-May-2023
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IDB Market Share in SOFR Swaps |
Types of SOFR Swaps SOFR Swaps in the IDB (inter-dealer broker) market trade primarily as Spreadovers to US Treasuries. This is by far the most frequent trade type for IDBs, with the highest volume in notional or dv01 terms and the most important in setting prices of SOFR Swaps. Next are Curve/Switch trades, which are […]
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| 15-May-2023
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Parsimonious HJM-FMM Model with Risk-Free Term Rates |
Authored by, Serena Manti and Gianluca Molteni of the Financial Engineering and A.I. team at List. In this post we would like to introduce our paper “Parsimonious HJM-FMM Model with the New Risk-Free Term Rates“, a modified version of the Heath-Jarrow-Morton (HJM) model that addresses the limitations of the traditional approaches in the context of […]
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| 17-May-2023
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Do you know how much now trades in RFRs after the CME conversion exercises? |
We’ve covered the CME conversion exercises in detail here on the Clarus blog because they were really significant events for market participants and for the broader transition to SOFR in US markets. You can catch up on the recent publications below: All of these blogs were written before we could assess the overall impact to […]
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| 17-May-2023
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Most Active Names in Credit and Equity Derivatives – April 2023 |
I last looked at the most active trading names in CDS and TRS in January 2023, so today I will update that for April 2023 data. This data is from U.S. SEC Securities Based Swap Data Repositorys (SBSDRs). CDS on Sovereigns Using SBSDRView, we can find the most active sovereigns for Credit Derivatives trades in April […]
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| 23-May-2023
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ISDA SIMM v25a the first off-cycle release |
Version 2.5a ISDA has published ISDA SIMM v2.5a with a re-calibration of interest rate risk weights only. This is an off-cycle release, due to the higher interest rates volatility observed in 4Q 2022, compared to that in 2019-2021 and the stress period of Sep-08 to Jun-09; the time period used for the calibration of v2.5. Quarterly industry […]
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| 24-May-2023
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Swap Markets in China – What You Should Know |
CNY Interest Rate Swap Introduction Before we look at some data on the Chinese swap markets, it is really important that readers are familiar with some of the terminology. Let’s start with the basics in terms of what the currency is actually called! Interest Rate Swap Market Conventions This blog looks at Interest Rate Swaps […]
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| 30-May-2023
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Term SOFR and BSBY Swap Volumes – May 2023 |
I last looked at Average and Term SOFR Volumes and Term SOFR and BSBY Volumes in early February 2023, focusing on 2022 volumes, so today I wanted to look at the 2023 data trends for these reference indices. As before we will seperate Term SOFR (published by CME) from Average SOFR (NY Fed), see the […]
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| 31-May-2023
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HJM-FMM Model – A Deep Dive |
Authored by, Serena Manti and Gianluca Molteni of the Financial Engineering and A.I. team at List. This is the follow-up of our first post introducing the paper “Parsimonious HJM-FMM Model with the New Risk-Free Term Rates“. Here, we would like to provide you with a brief more technical description of our innovative HJM-FMM model, followed by […]
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| 31-May-2023
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Now LCH Have Converted Your USD Swaps too! |
As recently as January I posed the question: That blog was written in response to the fact that 2022 continued to see plenty of USD LIBOR risk sent to CCPs. Could all of that trading just stop in time for the final cessation of USD LIBOR in June 2023? Following on from the recent CME […]
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| 6-Jun-2023
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We Need to Talk About €STR Futures |
There are extremely liquid markets in a number of EUR-denominated interest rate futures. If you don’t already know your Bund from your Bobl or Schatz then please read our primer “Mechanics and Definitions of Bond Futures“. As you can see from our CCPView volume charts, EUR bond futures are a significant portion of EUR futures […]
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| 7-Jun-2023
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Central Clearing of Bonds and Repos |
Regular readers of this blog will know that we are strong proponents of Central Clearing and since 2013 have written numerous articles on this topic for OTC Derivatives in Interest Rate, Credit and Foreign Exchange. In the past year or two, there has been increasing attention on central clearing for Bonds and Repos, so it […]
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| 13-Jun-2023
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Find Out What Was Weird About RFR Trading In May |
The latest ISDA-Clarus RFR Adoption Indicator has been published for May 2023 so I asked ChatGPT about the next report: I love how it states that because it is a language model it doesn’t predict the future. Rather than simply stating “you cannot predict the future smart @rse”. From my experience with ChatGPT, I found […]
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| 14-Jun-2023
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What’s New in CCP Disclosures – 1Q23? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Background Under the CPMI-IOSCO Public Quantitative Disclosures, CCPs publish over two hundred quantitative data fields covering margin, default resources, credit risk, collateral, liquidity risk, back-testing and more. CCPView has over 7 years of these quarterly disclosures for 44 Clearing Houses, each with multiple Clearing Services, covering the period from 30 Sep […]
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| 20-Jun-2023
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Most Active Names in Credit and Equity Derivatives – May 2023 |
Last month I looked at the most active trading names in CDS and TRS in April 2023, so today I will update that for May 2023. This data is from U.S. SEC Securities Based Swap Data Repositorys (SBSDRs). CDS on Sovereigns Using SBSDRView, we can find the most active sovereigns for CDS trades in May 2023. […]
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| 20-Jun-2023
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Gilty Secrets Of GBP Swaps |
(Sorry/not sorry for the title) UK Rates UK rates markets have been interesting ever since the autumn meltdown, and there are now lots of headlines around as yields break the highs last reached in those tumultuous trading days: The FT Alphaville overview of why June 2023 is not September 2022 is well worth a read […]
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| 27-Jun-2023
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The Latest on Canada and the Transition from CDOR to CORRA |
ISDA recently published a very informative webinar on the CDOR Transition: From this, I learned that 30th June 2023 (i.e. Friday!) is a big day for Canada Rates markets. Succinctly, no more new CDOR trading should take place after this date, other than for some well-defined exceptions. The CARR website is a great resource (from […]
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| 4-Jul-2023
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Bollinger, Greenspan and The Millennium Bug: LIBOR Is Now Dead |
USD LIBOR is no more: I will likely never type US0003M into my Bloomberg ever again. I doubt many will shed a tear at the ultimate demise of LIBOR because: LIBOR – The Numbers This is as good a time as any to therefore pause and consider some of the things we saw in USD […]
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| 5-Jul-2023
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2Q23 CCP Volumes and Share in IRD |
Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volumes. Today we look at 2Q23 Volume and market share in IRD for: Onto the charts, data and details. Volumes and Market Share For major currencies and regions, vanilla swaps referencing IBORs and OIS […]
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| 12-Jul-2023
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We Need to Talk About the Clarus API |
Most of our readers come to the Clarus blog to receive new information from us. Whether that be on the data side (such as the monthly RFR Adoption Indicator) or about new regulations (such as Central Clearing of Bonds and Repos). But do our readers ever stop to consider which tools we use to deliver […]
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| 19-Jul-2023
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New Block Trading Rules Will Now Start in December 2023 |
Those of you with long memories will recall a particular blog I wrote about Block Trading and new rules that were going to come into play: Those new rules could have come into play as early as March 2023, but they have been delayed until December 2023. As a result, we have just seen learnt […]
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| 19-Jul-2023
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2Q23 CCP Volumes and Share in CRD |
A review of Credit Derivatives (CRD) volumes and market share at Clearing Houses (CCPs) in 2Q 2023. All the charts and detail from CCPView. USD CDX, CDS and Swaptions CDX volumes significantly down compared to all the prior quarters shown. Market Share of USD CDX The upcoming ICE Clear Europe shutdown later in 2023, resulting in […]
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| 25-Jul-2023
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Even More on Blocks and new rules for FX |
CFTC Global Markets Advisory Committee Following up on my blog last week, there is now the recording of the CFTC’s Global Markets Advisory Committee (GMAC) available on youtube: There are some interesting take-aways: Showing; Elsewhere, Tradeweb and Bloomberg provided insights into the RFQ1 vs RFQ-to-many split amongst large trades. This is some really interesting data. […]
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| 26-Jul-2023
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FSB Paper on Liquidity in Core Government Bond Markets |
I recently took a first look at Central Clearing of Bonds and Repos and in that blog I mentioned a Financial Statility Board (FSB) paper on Liquidity in Core Government Bond Markets. This paper analyses the liquidity, structure and resilience of government bond markets, with a focus on the events of March 2020; characterised as […]
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| 1-Aug-2023
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SOFR Swaps Volumes and Share – July 2023 |
Let’s update my blog on IDB Market Share in SOFR Swaps with the most recent data and expand the coverage to also include D2C venues. Types of SOFR Swaps SOFR Swaps in the IDB (inter-dealer broker, D2D) market trade primarily as Spreadovers to US Treasuries. This is by far the most frequent trade type in […]
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| 8-Aug-2023
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How large are Cleared Swap markets? |
I published my first article on the ION Blog covering Cleared Swap markets and comparing open interest and volume between Swaps and Futures for Interest Rate Derivatives. Please read at How large are Cleared Swap markets?
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| 16-Aug-2023
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RFR Adoption July 2023 |
RFR Adoption is Increasing Again The latest edition of the ISDA-Clarus RFR Adoption Indicator was published earlier this week. You can find the full report over on the ISDA website here. As always, we provide a look into the data: Showing; SOFR Trading Increases As long-time readers well know by now, USD markets (and hence […]
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| 23-Aug-2023
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Clearing of US Treasuries – What Are People Saying? |
The SEC issued a proposal last year regarding a potential clearing mandate for cash treasuries and repos. There is a good two-pager summary from the SEC here: Or you can choose to read the entire proposal here: Clearing of Cash, Repo and Swaps are all different First of all, I think it is important to […]
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| 30-Aug-2023
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What You Need to Know about BRL Swaps |
But first… Before we plough into BRL swaps, did you know that the EUR Swaps market is now larger than USD? From CCPView: Showing; It doesn’t take a rocket scientist to work out what has caused this: I thought our readers would find that an interesting addition to their Summer reading. Back to the topic […]
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| 5-Sep-2023
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JPY TONA Futures: A Rising Star in the RFR Market |
*I hope our readers don’t mind, but I chose to accept a little help from Bard this week. With so much web traffic generated via Google searches, I thought it a worthwhile experiment. TIBOR Cessation No two markets are the same, and we see this in the adoption of RFR trading. Whilst JPY LIBOR is […]
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| 5-Sep-2023
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What’s New in CCP Disclosures – 2Q23? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Background Under the CPMI-IOSCO Public Quantitative Disclosures, CCPs publish over two hundred quantitative data fields covering margin, default resources, credit risk, collateral, liquidity risk, back-testing and more. CCPView has over 7 years of these quarterly disclosures for 44 Clearing Houses, each with multiple Clearing Services, covering the period from 30 Sep […]
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| 12-Sep-2023
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Most Active Names in Credit and Equity Derivatives – August 2023 |
I last looked at the most active trading names in CDS and TRS in May 2023, so today I will look at August 2023 data from US SEC Securities Based Data Repositorys (SBSDRs). CDS on Sovereigns Using SBSDRView, we can find the most active sovereigns for CDS trades in August 2023. The above list was a […]
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| 13-Sep-2023
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Brexit continues to impact EUR Swaps market share for CCPs and SEFs |
It all started with a blog titled “Moving Euro Clearing out of the UK: the $77bn problem?“. Now, ISDA and other trade associations have published a statement on the “active account” requirement for Europeans: Which says; In case any of this is new to our readers, Brexit has resulted in a (political) desire in Europe […]
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| 19-Sep-2023
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RFR Trading Is Now Back on Track – August 2023 |
The ISDA-Clarus RFR Adoption Indicator for August 2023 has now been published. Showing; Highlights Can the narrative cloud the facts? I feel like that is the case with RFR Trading. Look at headline adoption of RFRs in 2023: Plus; This is against a backdrop on the Clarus blog, whereby we have noted: The August 2023 ISDA-Clarus […]
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| 19-Sep-2023
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ISDA SIMM – What changes in v2.6? |
Version 2.6 ISDA has published ISDA SIMM v2.6 with a full re-calibration of risk weights, correlations and thresholds. The calibration period is a 1-year stress period (Sep-08 to Jun-09, the Great Financial Crisis) and the 3-year recent period ending Dec 2022 (or possibly later, but at time of writing I cannot find this specified, so am going […]
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| 25-Sep-2023
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Central Clearing of US Treasuries |
I published an article on the ION Markets Blog, please read at Central Clearing of US Treasuries. It highlights a recent DTCC White Paper on Assessing a Potential Expansion of U.S. Treasury Central Clearing, which includes findings from a survey.
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| 27-Sep-2023
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Clarus Goes Podcasting – What Do You Think? |
Amir and I have taken the bold decision to dip our toes into podcasts. For the foreseeable future, we will be giving you a verbal update on the blogs (and what doesn’t make the blogs) once a week. It gives us a chance to quiz each other (in the nicest possible way) about what we […]
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| 3-Oct-2023
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3Q23 CCP Volumes and Share in CRD and FXD |
A review of Credit Derivatives (CRD) and FX Derivatives (FXD) volumes and market share at Clearing Houses (CCPs) in 3Q 2023. All the charts and detail from CCPView. Credit Derivatives Volume USD CDX, CDS and Swaptions Overall volumes in 2023Q3 at $3.35 trillion as compared to $3.75 trillion in 2022Q3. Market Share of USD CDX The […]
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| 4-Oct-2023
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Clarus data reveals the truth about SONIA derivatives liquidity |
A few weeks ago, I highlighted that the EUR swaps market is now larger in size than the USD swaps market (within a broader blog post on the BRL swaps market): LIBOR cessation is likely the main reason for this change in the relative size of EUR markets. EUR markets trade FRAs and Basis swaps […]
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| 10-Oct-2023
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SEC Proposal to Mandate Climate Risk Disclosures |
I published an article on the ION Markets Blog, please read at SEC Proposal to Mandate Climate Risk Disclosures. There are differing opinions on whether the SEC has the power to prescribe such extensive rules, a point that SEC Chair Gary Gensler addressed in his recent testimony to the US Senate Comittee on Banking, Housing and Urban […]
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| 11-Oct-2023
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Using SACCR to monitor Counterparty Credit Risk |
Risk Weighted Assets Counterparty Credit Risk is typically the largest contributor to Risk Weighted Assets (RWAs) for banks. This Clarus blog covered RWAs way back in 2017 when looking at Basel III disclosures. It is highly unlikely to have changed in the intervening six years: In today’s blog, we don’t want to necessarily talk about […]
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| 17-Oct-2023
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Is volatility in RFR Adoption here to stay? |
Volatility in Rates markets has been elevated this year. However, I cannot remember a year when we haven’t said similar by October! It is very likely that the human-bias is innately more sensitive to change than stasis, which then leads inquisitive minds to work out what is causing the change. But one thing that is […]
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| 17-Oct-2023
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3Q23 CCP Volumes and Share in IRD |
Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volumes. Today we look at 3Q23 volume and market share in IRD for: Onto the charts, data and details. Volumes and Market Share For major currencies and regions, vanilla swaps referencing IBORs and OIS […]
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| 24-Oct-2023
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Term SOFR and BSBY Volumes – October 2023 |
I last looked at Term SOFR and BSBY Volumes in May2023, so today I will look at the YTD 2023 data trends for these indices, and as before seperate Term SOFR (published by CME) from Average SOFR (NY Fed). A one-sentence summary is that “Term SOFR Swap volumes are down, though still far higher than Average […]
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| 31-Oct-2023
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HJM-FMM Model – Fast Calibration via a Neural Network |
Authored by, Davide Gianatti, Serena Manti and Gianluca Molteni of the Financial Engineering and A.I. team at List. The aim of this post is to introduce a novel systematic approach that could be used to calibrate quickly any model describing interest rates. The core of the algorithm is a Neural Network (NN) that outputs the parameters […]
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| 1-Nov-2023
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Is Chris Barnes actually a robot? |
Do Androids Dream of Electric Sheep? Amir and I have been discussing on our podcast a new use of the Clarus blog – training AI models. Clarus content is a good candidate for training large language models – the blogs are structured, and they cover technical topics in an accessible manner. There are now well […]
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| 8-Nov-2023
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A new look at €STR Futures |
In June this year I wrote that “We Need to Talk About €STR Futures“. RFR/€STR Adoption continues to be volatile in Europe, but €STR Futures have had a pretty good year so far, with monthly volumes increasing steadily: Showing; However, ESTR futures have only managed to grab a tiny percentage of the overall EUR STIR […]
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| 14-Nov-2023
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Default Simulation Exercises by CCPs |
In June 2019, I wrote a blog titled, CCP Default Management Auctions, in which I covered the BIS CPMI-IOSCO “Discussion paper on central counterparty default management auctions” and explained how Clarus CHARM helps clearing members with their default management obligations, both actual and firedrill tests. One of the points in the discussion paper was on […]
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| 15-Nov-2023
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New Musings on RFRs |
This week I will start with a chart – the DV01 traded in USD OIS per month over the past three years: Showing; For the second chart today, consider the same data, but split by OIS Index – SOFR or Fed Funds: Showing; Overall, 26% of OTC OIS risk was traded versus Fed Funds – […]
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| 22-Nov-2023
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Swaption Volumes by Strike Q3 2023 |
Sometimes this blog would benefit from another Chris Barnes or Amir Khwaja! It has taken me until the tail-end of 2023 to revisit one of the most popular topics on the Clarus blog – Swaptions: I do not know which of the ~85 blogs I should not have written since I last wrote about Swaptions, […]
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| 29-Nov-2023
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Time Series of Swap Prices and Volumes |
Analysing existing datasets in new and novel ways, often throws up interesting insights and questions which help with our understanding of the real world and in turn help us to make better decisions. Today I wanted to showcase a new feature in SDRView, that demonstrates this, the Ticker Summary View. SDRView has transaction level data […]
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| 30-Nov-2023
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What You Need to Know About INR Swaps |
Where do INR Swaps Rank on the Global Picture? CCPView allows us to compare the relative size of INR swap markets to other currencies. Taking out the “G6” – USD, EUR, GBP, AUD, CAD and JPY – we see the below: Showing; Let’s look further into the INR Swaps market. Two Thirds of Cleared Volumes are […]
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| 6-Dec-2023
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Dec 4th has been and gone. Where are our new block sizes please? |
Back in June 2023, I covered the new block sizes that were due to come into effect on 4th December 2023. In case you missed them, please take a look before reading today’s blog: However – in what appears to be new news – the CFTC issued a No Action letter late in October to […]
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| 13-Dec-2023
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What is the latest European plan to onshore rates trading? |
Almost exactly a year ago, the EU proposed requiring market participants subject to a clearing obligation to clear a portion of the products that have been identified by ESMA as of substantial systemic importance through active accounts at EU CCPs.
The unknown in the past 12 months has been how the EU will define the “Active Account Requirement (AAR)”. In the past few days […]
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| 13-Dec-2023
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What’s New in CCP Disclosures – 3Q23? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures showing IM for ETD at $438 billion is down 2.5% QoQ and down 20% YoY, while IM for IRS at $283 billion is down 11% QoQ and up 1% YoY.
Read more to get all the detail.
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| 20-Dec-2023
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A Final Check-In On RFRs For The Year |
This is my final blog for the year, but the 2023 retrospectives will have to wait for January once all of the data is in. However, as the year draws to a close, I doubt 2023 will be remembered as the year that USD LIBOR finally ceased. That has to be considered a good thing. […]
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| 2-Jan-2024
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Our Top Blogs of 2023 |
For our first blog this year, I wanted to highlight our top blogs of 2023 and share a few statistics. Top New Blogs in 2023 Starting with a list of the most popular new blogs that we published in 2023. The top 5 with > 8,000 views and a total of 20,000 views for the […]
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| 9-Jan-2024
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2023 CCP Volumes and Share in IRD |
2023 volumes and market share for OTC Derivatives in Interest Rates reported by Clearing Houses. Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful analysis and comparisons. Contents: Onto the charts, data and details. Volumes and Market Share For major currencies and regions, vanilla swaps referencing IBORs and […]
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| 10-Jan-2024
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Can the UK get transparency right? |
Happy New Year everyone. My New Year has started by tackling 172 pages of FCA consultation – lucky me! In Summary Context The UK rules for pre- and post-trade transparency were largely inherited from MIFID II post-Brexit. In case any of our readers are not familiar with MIFID II transparency – it doesn’t work. We […]
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| 16-Jan-2024
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2023 CCP Volumes and Share in CRD and FXD |
A review of Credit Derivatives (CRD) and FX Derivatives (FXD) volumes and market share at Clearing Houses (CCPs) in 2023. All the charts and detail from CCPView. Credit Derivatives Volume USD CDX, CDS and Swaptions CDX volumes at $11 trillion, representing 89% of USD volume with single-name 9% and CDXSwaptions just 1%. Market Share of USD […]
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| 17-Jan-2024
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Cross Currency Swaps Review 2023 |
According to the FT, we need a dose of optimism at the beginning of 2024. What about these statistics to provide you with an uplifting outlook for the New Year? SDRView Volumes SDRView shows the monthly volumes transacted of Cross Currency Basis swaps. These are, on the whole, the vanilla interbank type of mark-to-market cross currency swaps. […]
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| 24-Jan-2024
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Repo: The heart of the global financial system |
My colleagues Ed Tyndale-Biscoe and Chris Brown published an article on the ION Markets Blog, which is well worth a read at Repo: The heart of the global financial system and why the SEC took action.
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| 24-Jan-2024
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RFR Adoption Review 2023 |
Now seems like the right time to call an end to the regular series of blogs that we have been writing about the ISDA-Clarus RFR Adoption Indicator. Consider today’s blog your “cut-out and keep” guide to one of the biggest changes the derivatives industry has ever witnessed. A Brief History The Indicator was first published […]
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| 30-Jan-2024
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Swaps Compression: What is it and why is it important? |
Another interesting article on the ION Markets Blog provides an introduction to Swaps Compression, for those not familiar with this or just needing a referesher on the what and why, please read at Swaps Compression: What is it and why is it important?
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| 31-Jan-2024
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USD Rates Overview in 2024 |
We have previously noted that EUR Rates are now larger than USD Rates in terms of notional traded across OTC swaps (see here and here). This change has arisen because EUR has continued in a multi-rate environment – both €STR and EURIBOR swaps still trade, whilst USD has largely moved to SOFR, with Fed Funds […]
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| 6-Feb-2024
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EUR Futures Latest – Still a 3 Way Battle |
We turn our data lens back to Europe for this blog to look at how the market shares of CME, Eurex and ICE are evolving across EUR futures. Last time out, I noted that Eurex had kick-started their EURIBOR volumes. Let’s look at the data since then. Market Share in EURIBOR Futures CCPView reveals a […]
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| 14-Feb-2024
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Could “enshittification” happen in derivatives markets? |
*Disclaimer – this is a tongue-in-cheek consideration of third-order risks in our markets. Hope you enjoy. For those who missed it, the FT introduced us to “enshittification” last week, and the article has no doubt made the rounds of trading floors ever since: https://www.ft.com/content/6fb1602d-a08b-4a8c-bac0-047b7d64aba5 Why are we choosing to talk about it on the Clarus […]
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| 14-Feb-2024
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2023 SEF Volumes and Share in SOFR Swaps |
Background In May 2023, I published a blog on IDB Market Share in SOFR Swaps, which used data we collect, filter and enhance in pur SDRView product. The blog looked at the type of SOFR Swaps that trade on Inter-Dealer Broker (IDB) SEF venues, also referred to as Dealer-to-Dealer (D2D venues); namely Spreadovers, Curves and […]
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| 20-Feb-2024
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T+1 and FX: The opportunities and challenges of a shorter settlement cycle |
28 May 2024 is set to be a pivotal moment in the history of securities trading, as from this day, US trades in cash equities, corporate debt and unit investment trusts must settle T+1 instead of T+2. One of the challenges is cross-border trading and the implications for trades with a foreign currency component. Eugene […]
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| 21-Feb-2024
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Best Practices for Variation Margin |
No one wants to be called in default by a CCP during stressed markets as a result of operational complexity/failures – much as ICE & Citi stated regarding March 2020: So today I follow up on our Clarus blogs (and podcast!) regarding members requirements at CCPs. For example, you can take a look at the […]
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| 27-Feb-2024
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Did we learn anything from the latest European announcements on clearing? |
The Clarus blog covered Active Accounts back in December, and followed up with probably the first podcast in the world to cover Active Accounts: The European Parliament have followed this with an announcement this month that: The European Commission then provided the following details: For those of us who thrive on the details this looks […]
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| 5-Mar-2024
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Cable Cross Currency Swaps 2024 |
Issuance A particular headline in the FT recently piqued the interest of this blogger: Like a moth to a flame, I was drawn to the statement: The demand has helped push a number of continental European companies to issue sterling debt for the first time in recent months, including German real estate company Vonovia, German […]
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| 12-Mar-2024
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What’s New in CCP Disclosures – 4Q23? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Background Under the CPMI-IOSCO Public Quantitative Disclosures, CCPs publish over two hundred quantitative data fields covering margin, default resources, credit risk, collateral, liquidity risk, back-testing and more. CCPView has over 8 years of these quarterly disclosures for 44 Clearing Houses, each with multiple Clearing Services, covering the period from 30 Sep […]
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| 13-Mar-2024
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Mechanics and Definitions of the ISDA Credit Support Annex (CSA) |
Credit Support Annexes used to be the dullest of the dull. A “back-office”, operational necessity that helped reduce counterparty exposures. Now, they are intrinsic to the functioning of modern day derivatives markets and have blossomed in both number and potential complexity as a result of the Uncleared Margin Rules. If you don’t have a CSA, […]
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| 19-Mar-2024
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SEC Clearing Mandate for US Treasuries |
The SEC final rule on clearing of US Treasury Securities was published on March 18, 2024. Now that the scope and timelines are known, the challenges in implementation are becoming apparent. We cover the details on the ION Markets Blog.
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| 20-Mar-2024
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€STR Volumes and Market Share |
Very occasionally, the data writes a blog for me. This is one of those times, with three particular highlights: €STR Futures I have slightly tweaked our €STR Dashboard, which summarises key liquidity attributes in this growing market: Showing; The really large volume days at Eurex have not materially added to the Open Interest yet, where-as […]
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| 27-Mar-2024
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RFR Adoption Update |
We have had a number of people reach out and ask when the RFR Adoption Indicator will next be updated. It is a great vindication of all of the hard work that has gone on over the past 4 years (and even longer when you consider the wider work on LIBOR cessation, Fallbacks and Benchmark […]
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| 2-Apr-2024
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Retail brokers in Europe poised to expand derivatives as regulatory challenges mount |
Potential restrictions on Contract for Differences (CFD) markets are leading retail brokers to evaluate a shift towards institutional markets and listed futures and options. Bruce Roberts and Chris Brown cover the details on the ION Markets Blog.
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| 10-Apr-2024
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What’s New in JPY Swaps in 2024? |
Covering; ISDA AGM in Tokyo I thought I would try to be helpful with the timing of this blog. The ISDA AGM is due to take place April 16-18 in Tokyo: Most delegates will take time to also see Tokyo-based clients, and will therefore be discussing the JPY swap market whilst doing so. So consider […]
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| 15-Apr-2024
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1Q24 CCP Volumes and Share in IRD |
This is an article about CCP volumes and market share in the IRD. It discusses volumes for major currencies and regions. It also details CCP market share. USD OIS swaps are the highest on record. EUR OIS volumes are also at a record high. The combined EUR IRS and OIS volume is almost equal to the USD OIS volume. AUD swaps are down from a year earlier. CCP market share is dominated by LCH with some exceptions.
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| 16-Apr-2024
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All You Need To Know To Avoid The Trade Execution Requirement? |
What is a MAT trade? A MAT filing, or “Made Available to Trade” determination, is when a trading venue (SEF) submits a proposal to the CFTC stating that they deem certain swaps to be liquid enough to have an execution mandate applied to them. Basically, a SEF says “I think these swaps should only be traded on SEFs in […]
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| 24-Apr-2024
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How Much Margin? The 2023 Edition |
Initial Margin ISDA have just published the latest edition of the “ISDA Year-End Margin Survey”: We have covered previous versions of this survey, which are always worth a re-read because you can laugh at any predictions we made in the past! Sifting through all of those reveals that between $650-800bn in extra IM was anticipated by ISDA as a […]
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| 29-Apr-2024
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Regulating the transformative power of AI in Asset management |
Artificial Intelligence (AI) is a transformative technology and this article covers a number of key regulatory areas for asset management including the recent EU AI Act, bias, transparency and security. Please read on the ION Markets Blog.
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| 29-Apr-2024
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10 CCP Policy Proposals to make markets better |
TLDR; For anyone interested in the BCBS paper/consultation on “Transparency and responsiveness of initial margin in centrally cleared markets – review and policy proposals” (and with a title like that who wouldn’t be interested in it?!) I will try to summarise the 64 pages in 1,200-odd words. Some of the thoughts that I have on the proposals may be […]
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| 7-May-2024
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Most Active Names in Credit Derivatives – April 2024 |
More than six months have passed since I last looked at the most active names in CDS and TRS, so high time to take a look at recent data from US SEC Securities Based Data Repositorys (SBSDRs). CDS on Sovereigns Using SBSDRView, we can find the most active sovereigns for CDS trades in April 2024. The above list was a […]
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| 7-May-2024
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What’s New in AUD Swaps in 2024? |
With so many AUD blogs behind us, I figured it was high time we started adding dates to the titles – otherwise I’ll never remember what I wrote and when! The previous AUD articles are linked below: These blogs are quite enjoyable to write, as it gives me an opportunity to “surf” the data and pull […]
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| 14-May-2024
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Using AI for Market Abuse Surveillance |
The EU Market Abuse Regulation (MAR) requires institutions to monitor transactions and develop specific algorithms to check for possible abuse covering insider dealing, market manipulation and other categories. One of the challenges is that calibrated monitoring thresholds tend to be conservative and consquently produce a high number of false positives. These must then be manually […]
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| 15-May-2024
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€STR Volumes and Market Share April 2024 |
It feels almost disingeneous to say I “wrote” this blog – and this time I don’t even have to resort to AI co-pilots to say that! The data really writes the story itself – there is little need for accompanying commentary this week: €STR Futures Our €STR Dashboard summarises key liquidity attributes in this growing […]
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| 22-May-2024
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FX Clearing – What Happens in March stays in March?! |
FX Cleared Volumes Using CCPView, we see that cleared OTC FX has grown again since I last wrote about it in 2022: Showing; Are These Still All NDFs? Not anymore! FX Options have seen record volumes in April 2024: 85% of cleared FX is now in NDFs, substantially lower than the 96% back in 2022. […]
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| 28-May-2024
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Swaption Volumes by Strike Q1 2024 |
Time to update and revisit one of our most interesting 2023 blogs – Swaptions: Swaptions showcase a different use case for SDR data, and highlight why data augmentation is necessary. Straddles Are Back! My previous look at 2023 trade counts highlighted: As soon as we noticed this, we set our sights on identifying Straddles again […]
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| 4-Jun-2024
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SOFR Swap SEF Volumes – May 2024 |
Continue reading for the charts, tables and details Background In February 2024, I published the blog 2023 SEF Volumes and Share in SOFR Swaps, which used data we collect, filter and enhance in our SDRView product. That blog looked at the type of SOFR Swaps that trade on Dealer-to-Dealer (D2D) and Dealer-to-Client (D2C) venues; namely Spreadovers, Curves […]
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| 5-Jun-2024
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JPY Swap Clearing – Why do dealers prefer JSCC? |
And equally “Why do clients prefer SwapClear?” The Data It was only recently that I provided a general overview of the JPY Swaps Market in 2024. As so often happens, that blog sparked some conversations, which sparked some number crunching, leading us here. Last time, I noted that the JSCC-LCH basis had shown a significant […]
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| 11-Jun-2024
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Improving transparency in ML models for market abuse detection |
We recently covered an article on Using AI for Market Abuse Surveillance, a very interesting use of Machine Learning (ML) to improve the classification of alarms generated in market surveliance. One of the issues with ML is the lack of transparency, due to the “black-box” nature of the models. So you get an answer, but […]
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| 12-Jun-2024
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SOFR Options – How Healthy Is The Market? |
With LIBOR now a distant memory, is options activity in USD rates markets back to pre-cessation levels? Let’s tour the data…. Futures – Exchange Traded Options on SOFR contracts Options on Exchange Traded Derivatives are the “standardised” version of non-linear liquidity, with standardised expiries (quarterly, monthly and even weekly for certain underlyings) and strikes in […]
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| 19-Jun-2024
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What’s New in CCP Disclosures – 1Q24? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Background Under the CPMI-IOSCO Public Quantitative Disclosures, CCPs publish over two hundred quantitative data fields covering margin, default resources, credit risk, collateral, liquidity risk, back-testing and more. CCPView has over 8 years of these quarterly disclosures for 44 Clearing Houses, each with multiple Clearing Services, covering the period from 30 Sep […]
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| 19-Jun-2024
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A Dummies Guide to Trading Interest Rate Swaps |
This week marks the 10th Anniversary of my first ever blog. That also means it is a long time since I last traded an interest rate swap. To mark the occasion, I have documented the trading strategy that I used all those years ago. Enjoy! Three Rules This strategy follows three rules: What is Positive […]
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| 25-Jun-2024
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CAD Swaps – What’s New? |
OMG. The last time I wrote about CAD Swaps was in 2017! Seven years later, what has changed? (Skip to the Summary to find out 😛 ). CDOR-CORRA Conversion The not-so-new news is that CDOR will cease in four days time (28th June 2024 will be the last fixing ever published). I have covered the […]
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| 3-Jul-2024
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Swaption Volumes by Strike Q2 2024 |
This blog follows on from the interesting activity we have seen across Options markets so far this year. Take a look if you have missed anything: I have written previous Swaption reviews after large, directional moves in Rates. Q2 2024 was a little bit different, although it would still be characterised as a “volatile” quarter. […]
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| 10-Jul-2024
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RFR Adoption Q2 2024 |
Time for a quarterly check-in on RFR trading. The data provides a high-level overview of trading activity across all Rates products. Clarus API – CCPView As a reminder from the previous blog, Clarus microservices allow me to query numerous volume measures from CCPView. That means I have rebuilt the RFR Adoption Indicator using just two queries to […]
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| 10-Jul-2024
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2Q24 CCP Volumes and Share in IRD |
Clarus CCPView has daily volume and open interest data published by each CCP, which is filtered, normalised and aggregated to allow meaningful comparisons of volumes. Today we look at 2Q24 volume and market share in IRD for: Which show record high quarterly volumes for GBP, JPY, EMEA, AsiaPac and LatAm Swaps. Onto the charts, data and details. Volumes and Market Share For […]
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| 17-Jul-2024
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€STR Volumes and Market Share June 2024 |
€STR Futures Our €STR Dashboard summarises key liquidity attributes in this growing market: Showing; Open Interest CCPView provides all the data we need on Open Interest for €STR futures: EURIBOR EURIBOR continues to dominate EUR STIR future volumes: Showing; CME €STR Watch The CME have added €STR to their monetary policy tracking tools, which is […]
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| 23-Jul-2024
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Allocation Workflow in Futures and Options |
At Industry Events focusing on Futures and Options, you often hear about trade allocation workflow and efforts to improve this important post-trade process. Not knowing much about this topic, I recently read a very interesting article, “The evolution of F&O clearing workflows: Let’s talk allocation!” on the ION Markets Blog. Well worth a read.
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| 31-Jul-2024
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GBP Swaps – What’s New? |
It’s time to take a look at UK swap markets. I tend to do this about once a year, and the last time was June 2023: Again, I will reference FT Alphaville for their great coverage of the UK and in particular highlighting the potential for stability in one of their recent posts: A good […]
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| 7-Aug-2024
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Handling the complexities of TARF FX Options |
Target Redemption Fowards (TARFs) are complex OTC financial instruments used in FX markets. An instrument type that many of us will have heard about in passing, but not had the need or time to delve into the details. My colleagues, Serena Manti and Gianluca Molteni have written the first of a series of articles on […]
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| 7-Aug-2024
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Just how bad are trading conditions right now? |
This is very likely a premature blog. But it’s August, it’s quiet, and I haven’t written a “live” blog since Credit Suisse went up the swanny. So whilst Bloomberg is declaring a “$6.4 Trillion Stock Wipeout” and Reuters a “Global Market Rout” I note at the very outset that more sanguine minds rule over at […]
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| 20-Aug-2024
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Monitoring of Hedge Funds |
Hedge funds are frequently in the financial news, which is not at all surprising given the size of the sector and the public profile and wealth of the founders. So it is good to see that a Hedge Fund Monitor has been released by the Office of Financial Research of the U.S. Department of the […]
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| 27-Aug-2024
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Volumes in EUR Swaptions |
June 2024 saw the largest number of EUR Swaptions reported to SDRs in the past three years: Showing; My interest in EUR Swaptions was sparked by a recent Risk.net article; I’m not sure our data shows much support for the idea that it was straddles specifically that led to a spike in volumes. Further complicating […]
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| 4-Sep-2024
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USD Rates – What’s New? |
USD Outright Volumes The chart below shows monthly volumes since Sep 2021: Showing; And we shouldn’t avoid the chance to present another impressive chart. Average Daily Volumes in USD Rates keep on increasing each quarter: Will September 2024 be busy enough for us to close the quarter with another record? Stay tuned to the Clarus […]
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| 10-Sep-2024
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TARF pricing with the Dupire local volatility model |
Following on from the first article on Target Redemption Forwards (see Handling the complexities), my colleagues Serena Manti and Gianluca Molteni have written an interesting article on pricing using the Dupire local volatility model as the path dependent features of these products means that the standard Balck Scholes model with it constatnt volatility assumption is […]
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| 17-Sep-2024
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What’s New in CCP Disclosures – 2Q24? |
Clearing Houses have published their latest CPMI-IOSCO Quantitative Disclosures: Background Under the CPMI-IOSCO Public Quantitative Disclosures, CCPs publish over two hundred quantitative data fields covering margin, default resources, credit risk, collateral, liquidity risk, back-testing and more. CCPView has over 8 years of these quarterly disclosures for 44 Clearing Houses, each with multiple Clearing Services, covering the period from 30 Sep […]
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