Compression, SDR and TrueEx SEF

My interest in writing this article was sparked by the 11 December press release from TrueEx announcing trades executed on its Portfolio Terminations and Compactions platform. So I decided to look at the past 3 days of data from the US DTCC SDR.

We have been thinking about adding Terminations activity in SDRView, so as a prototype of that idea I turned to the tried and tested power of Excel and Pivot table analysis.

First lets look at Interest Rate Swap termination activity counts for the past 3 days.

Terminations By Ccy

This shows terminations in 23 different currencies over this 3 day period.

Now lets home in on the 3 major currencies, EUR, JPY & USD.

Terminations - majors

From this we can observe the following:

  • USD has the highest number of terminations with a spike on 10-Dec
  • JPY also has a spike on 9-Dec
  • The second table shows the gross termination fee amounts paid to terminate these trades
  • A word of caution on these amounts, the data quality is not great as many terminations are reported with zero fee!
  • Despite that we can see that 10-Dec had gross fees of more than $160m

So it seems Dec-10 is an interesting date to investigate to look for compression activity. Given that the TrueEx press release was date Dec 11, it may well be that they were referring to Dec-10.

As evidence of a compression run, we would look for lots of trades with the same maturity being terminated on a single day. Very different behaviour than on a normal day, when trades for random maturities would be terminated.

Looking at each of our 3-days, we do indeed find such activity on Dec-10, as summarised below.

Terminations - USD trades

  • For maturity 31/08/2016 there are 82 terminated USD trades with $650 million gross notional
  • For maturity 07/06/2016 there are 41 terminated USD trades with $658 million gross notional.

Are these the portfolio of trades that are referred to in the TrueEx press release?

Your guess is as good as mine.

However that is what the data would lead us to believe.

Another example of the interesting information we can glean from the new transparency in Swap markets.

If you think we should add Terminations to SDRView, please comment on this article.


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