Clarus Financial Technology

Comparing OTC and Futures Data

Recently we introduced exchange traded derivatives in CCPView, allowing us the ability to start exploring this world alongside the OTC market more holistically.  Many of you know we already track some futures in SEFView, however the universe in SEFView is SEF-executed trades; whereas in CCPView we can now look at the entire world of cleared derivatives.

We’ve begun with CME -cleared Interest Rate Futures.  So this spans:

Cleared OTC and ETD Activity

Lets have a look at what daily volume looks like, across all Interest Rate Derivatives:

Daily USD Notional Equivalent traded in OTC & ETD for IRD.  2015 Year to Date.

So to be clear, the universe of OTC here (in red) is all currencies, all cleared IRD products (Vanilla swaps, basis, FRA, OIS, ZC, etc).  It would seem the ETD market of just the CME trumps this in notional terms.

Now stripping that same data back to just USD-denominated instruments:

Daily USD Notional Equivalent traded in OTC & ETD for IRD. USD instruments only. 2015 Year to Date.

By now, we should all know the dangers of talking in notional terms when it comes to derivatives.  Clearly a 10 million USD Eurodollar position pales in comparison to a 10 million USD 30Yr swap.  Unfortunately some of the OTC data that is published by clearing houses fails to report the tenor, so we’re unable to put these notionals into risk perspective.

However we can drill deeper and examine just the ETD’s:

Exchange Traded Derivatives.

This seems to tell us that the vast majority of the ETD is MM futures.  Which as we all know are short dated.  And then drilling one level further, we can see the type of MM Futures:

Breakdown of MMKFut.

So fairly clear that its the Eurodollar futures activity that is the largest.  Interesting to note that the Eurodollar bundles seem to be inconsequential to the activity.

Open Interest

The previous analysis above was all Volume based, so what about OI?

Open Interest comparison of ETD and OTC

What should be obvious is that while the daily activity of ETD trumps that of OTC, the open interest in OTC vastly surpasses that of ETD.  Confirms the intuition that while billions of notional is traded each day, that much of this activity is closed out and netted on a daily basis.  In fact if we compare Daily Volume to OI for IRD and Futures, we get:

Daily Volume as a % of OI. Based on past week of data for USD-denominated instruments.

Telling us that 14% of open interest is transacted daily in ETD, whereas only a fraction of 1% of open interest is transacted daily in OTC.  As you’d expect, but good to see this in numbers.

Like for Like / Swap Futures

Lets look Swaps vs Swap Futures.  We’ve done this before in SEFView, but now we have the universe of Cleared IRS to compare it to.  So, just for USD IRS (Vanilla) vs USD SwapFutures:

Vanilla USD IRS vs USD Swap Futures Volume

 

 

Clearly swap futures have a long way to go, now that we are including the cleared IRS from the rest of the world.

Staying on Swap Futures, we should look at the performance of each venue, which we believe is only the CME DSF contract and the Eris contracts, both of which are cleared at CME.  Note that we’ve been checking on Eurex Swap futures which were launched last year, but there does not appear to be any activity yet.

Volume:

Swap Futures volume, in millions of USD equivalent

And now OI:

Swap Futures Open Interest. Millions of USD equivalent.

What strikes me here is a couple things:

I cant quite explain the fact that DSF show more daily activity, but Eris Standard contracts show more OI.  Alas I am out of time for today.  Please send us your thoughts.

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