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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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, […]