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 […]

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 […]

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 […]

What is going on in Uncleared Derivative Markets?

We look at data from the BIS on Uncleared IRS. Notional Outstanding of Uncleared derivatives has been constant for the past year. The Gross Market Value of these derivatives has decreased by around 40%. The reduction in market value seems to be related to rates moving higher. Both Cleared and Uncleared markets have seen large […]

Bitcoin Meets OTC Derivatives

I attended the FIA event last week in Chicago.  Much of the same stuff.  Bank capital, swaps regulation, clearing, MIFID.  And the obligatory panel on bitcoin. Over the past couple years, Bitcoin panels in our industry have tended to start out with the moderator making clear “we’re not going to talk about bitcoin the currency, […]

Summary Of Treasury’s Capital Markets Report to Trump

Shortly after Trump became president, true to his campaign promises to “roll back regulation”, he issued an executive order for a review of the American Financial system, with some core principles around making regulation smarter and fostering growth, among others. The US Treasury is responding to this order by providing 4 reports covering Banking, Capital […]

Mechanics of Cross Currency Swaps

Cross Currency Swaps exchange a funding position in one currency for a funding position in another currency. The interbank market trades a resettable floating-floating swap, incorporating a USD cash payment to reset the mark-to-market close to zero at each coupon date. We explain the nuances of the product via the cashflows. The cross currency swap market […]

What is the size of the Uncleared IRS Market?

We estimate the size of uncleared derivatives markets in 2016 We combine BIS Survey data with our own Clarus CCPView cleared data Vanilla Fixed-Float Interest Rate Swaps account for over $250bn in notional traded every day Despite Clearing Mandates in place, some portion of derivatives markets will remain uncleared Uncleared Derivatives A portion of the Interest Rate […]

Understanding BIS Derivatives Statistics

The BIS publish Semiannual OTC Derivatives Surveys which are complemented by a broad-ranging Trienniel Survey Clarus data, available daily, reconciles to within 2% of these BIS Surveys Our explanation of the data methodology will help anyone interested in market volumes The BIS have a broad-based and narrow list of reporting dealers which can affect the interpretation of data […]

What is a 0x3s FRA?

We look at the mechanics and definitions of a Forward Rate Agreement (FRA) It is the simplest interest rate derivative to price, trade and settle Market conventions tend to be split between Commonwealth currencies and the rest of the world There are many reasons to trade the product, resulting in nearly $10trn per month in volume. […]