CME-LCH Basis Spreads Blow Out

Following on from my Nov 3rd blog on CME-LCH Basis Widens Again, I thought I would look to see if anything interesting has happened since. Well it most definitely has, so lets take a look at the data.

Starting with a screenshot of Tradition’s pricing page on BBG from Nov 17th.



30Y is showing 3.7 bps!

An all-time high.

On 28-Oct it was 2.2 bps.

Other major tenors:

  • 2Y has gone from 0.35 bps to 0.70 bps
  • 5Y has gone from 1.2 bps to 2.3bps
  • 10Y has gone from 1.6 bps to 3.0 bps
  • 20Y has gone from 1.9 bps to 3.4 bps

A near doubling of the spreads for these tenors and higher spreads then we ever seen.

Significant market moves indeed.

Volumes of CCP Switch Trades

The next question is has this price move resulted in hedging using CME-LCH Switch trades.

Recall last time we we did not see any evidence of this.

Using SEFView we can chart the last 5 business days of CME Cleared Swap volume at the four major D2D SEFs, on the assumption that this is all CME-LCH Switch trade activity.


Showing that this time:

  • Volume is indeed massively up
  • 16 Nov was a huge day with $11.4 b traded
  • Tradition had the lions share of this with $9.1b
  • Tradition had $5.7b, $5.2b, $3.2b, $0.85b on the other 4 days
  • Tradition’s gross notional was $24b over the 5 days
  • Recall 11-Nov was a US holiday
  • ICAP shows $4.8b on 13 Nov and $2.2b on 16 Nov
  • ICAPs gross notional was $8b over the 5 days

The overall total of $35 billion for these 5 days is equal to the monthly average over the last four months.

The period Nov 2-17 has $45b of gross notional and we have 8 trading days to go in the month.

So November will be a record high for CCP Switch trades.

Range of Tenors

Let also look at which tenors have traded in the past 5 days.


Showing that:

  •  20Y with $2 billion gross notional at Tradition is the largest in risk equivalent terms
  • followed by 3Y with $8.5b also at Tradition
  • then 10Y with $2.1b at ICAP and $1.9b at Tradition
  • then 5Y with $2.9b at ICAP and $2.1b at Tradition
  • 2Y, 4Y, 7Y, 30Y all show significant activity
  • Tullet has $2b at 3Y, $500m at 2Y and $350 at 8Y

In DV01 terms a cumulative $19 million traded over the 5 days.

(We do not know how much as outright switch volume and how much curve spreads and butterflys).


CME-LCH Basis Spreads have widened further in November.

They are now at all-time highs with 5Y at 2.3bps and 30Y at 3.7bps.

We see high volumes of CCP Switch trading, specifically on 16 Nov with $11.4b traded.

Tradition has by far the most volume at $27b for the Nov 2-17 period.

Overall volumes for Nov 2-17 are $45b.

Already higher than the $35b monthly average.

November will be a record month for CCP Switch trades.

It is too soon to look at the impact on CME and LCH market share.

So will look at that in our next monthly Swaps review blog.

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