Week 6 of SEF trading is completed and we have some interesting statistics in this weeks edition.
LETS GET STARTED
First, the headline numbers across the board. Remember everything I’ve quoted is in 1mm USD equivalents:
EX MARKS THE SPOT
Similar to most weeks, there is quite a lot of activity in FRA’s. Assuming like we did last week that much of the FRA activity revolves around TPMatch and RESET, lets aim to remove that from the data. Daily activity in TP and ICAP for FRAs:
Removing these, we have a cleansed activity report (note that this removes over half of the volume!) :
We’re seeing the same trend continue. In the dealer space, ICAP leading the field in rates and FX, and GFI the primary IDB in credit. In the client space, Bloomberg holding all 3 categories.
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Now back to your regularly scheduled program…
NO NO-ACTION (DOES THAT MEAN ACTION?)
November 1 marked the expiration of the no-action relief given to clients to utilize a SEF without the appropriate paperwork & onboarding having taken place. So this week commenced the first full week of SEF activity comprised of only fully on-boarded participants. Would this mean that we’d see a drop-off in activity? Lets look at the data.
The table below shows total USD activity (ex-FRA) between the two weeks, and the relative change in activity:
We can see the overall volumes have in fact increased by 10% for the week ending November 8. So much for the expiration of no-action relief. Or is it?
You can clearly see some significant changes both to the upside and downside. So I separated out the activity by D2C and D2D. I have made some assumptions here in doing so (I’d welcome feedback on these assumptions). In particular, I have assumed ICE to be all dealer volume, and Reuters to be the ex-FXAll client business. I could believe the lines are a bit more blurred than that. Regardless, the results are interesting:
This more clearly shows the results that I expected to see. Client volumes off by 13% overall, and in fact total volumes are down for nearly every D2C SEF. The one exception is Javelin, which posted all of its weekly volume on Friday, presumably some client onboarding. Good to see a pickup there. There are some sharp drop-offs in a few of the D2C SEFs, which might corroborate the expectation that clients now need a ticket to ride the SEF bus.
The fact that ICE shows a drop of 89% makes me wonder if in fact I have categorized them incorrectly, perhaps they belong in the D2C category.
There are quite a few interesting observations that you can make with this data, however they are probably best saved for when we have more data in the weeks to come. Of course, I’ll have mine next week around this time. Please share any thoughts in the comments section below.
UPDATE
This weekly issue of SEF updates is not the most current. To see all SEF posts, including the most recent, please click through to the SEF Category.