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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

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. […]

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 […]