It feels almost disingeneous to say I “wrote” this blog – and this time I don’t even have to resort to AI co-pilots to say that! The data really writes the story itself – there is little need for accompanying commentary this week:
- Volumes and Open Interest of €STR futures are continuing to increase:
- Open Interest is now ~$200bn equivalent, up from ~$50bn at the beginning of the year.
- ADVs reached $200bn in April 2024, up from $80bn in Feb.
- ICE is now leading the way at over $100bn of Open Interest, with both Eurex and CME at about $50bn.
- ICE saw their largest days ever in €STR volumes in April, with over $375bn traded in a single day.
€STR Futures
Our €STR Dashboard summarises key liquidity attributes in this growing market:
Showing;
- Volumes traded in €STR futures made yet more records in April 2024.
- This is impressive given that March was an IMM roll month (and April isn’t).
- €STR futures made up 12.2% of all EUR STIR volumes, up from ~10% in March.
- ICE will surely be happy with the volume picture. They saw significantly higher volumes in April, 90% higher than in March, which were already 90% higher than February. That is an impressive run for ICE!
- Eurex and CME both saw similar volumes to March. That seems a good result for both of them given March was a record month.
- Will market shares settle down after this latest leg higher? Eurex saw 49%, ICE 43% and CME the remaining 8-9% of volumes.
- There is more on total EURIBOR volumes below, but we note that ICE see 87% of total EUR STIR volumes.
We don’t normally write much about Open Interest, but by the time our podcast on €STR futures was recorded, it was already noteworthy:
The bottom right chart above can be analysed in our CCPView app:
- ICE has now hit 100,000 contracts of Open Interest, the first exchange to reach this milestone in €STR futures. Who will be next?
- As we stated on the podcast, CME saw a relatively large drop over the March IMM, but this has recently recovered, and is back to within a couple of thousand contracts to the pre-roll OI.
- Interestingly, Eurex Open Interest has really started to increase, now sitting neck and neck with CME.
- Overall, ICE have about twice the Open Interest of either CME or Eurex.
This market share battle is occurring across many fronts – it is not just volumes or market-maker incentive programmes, but Open Interest and the battle for the share of wallet of end users.
Novel Data
Which brings me onto some people who have done a lot more work than I have in analysing €STR market dynamics. In case you haven’t seen it yet, please head over to the BMLL blog for their piece:
€STR Wars: Attack of the Clones Part 2. Source: BMLL
(I think the title should technically have been The Clone Wars, but this just proves they put a lot of effort into the actual analysis rather than blog titles 😛 )
In a nutshell;
- Armed with order-book data, they analyse:
- Relative bid-offer spreads for outright top-of-the-order-book prices.
- Depth of order book.
- Activity type – whether outright or implied via spreads to €STR contracts or spreads to EURIBOR contracts.
It is very clever analysis, that is also well presented. We have no affiliation with them, but it is data we would love to get our own hands on too!
Something for everyone?
Each of the three exchanges can continue to point toward something positive in the data:
- CME have a consistent franchise – and can point to the fact that Open Interest dropped and rebounded around a roll-date, behaviour that is somewhat expected of end-users.
- ICE can point toward OI and volume growth in each month as they extend more and more of the EURIBOR franchise success into €STR.
- Eurex can continue to point toward having the largest volumes each month, and now are seeing an Open Interest to rival CME’s.
- I also saw that ICE launched €STR options on April 22nd, CME will launch options on May 20th and Eurex – not sure?. But that is going to be another one to watch – and to see if a successful options franchise leads to even more volumes in the underlying contracts.
And EURIBOR?
Combining €STR and EURIBOR sees ICE as the sure-fire market leader with an 87% market share. March saw significant EURIBOR volumes traded at Eurex for the first time. However, unlike €STR contracts, volumes declined at Eurex for EURIBOR contracts last month:
Will EURIBOR trading away from ICE catch any traction? Open Interest in EURIBOR runs at about 16 million contracts (at ICE), so it remains a much larger market than €STR. It is worth keeping an eye on given the sheer size of the potential prize.
Swaps
I feel like I should add a section on €STR Swaps to these regular blogs, particularly given the blog title isn’t specific to futures. With Active Accounts yet to be implemented, I figure we should start building up the data just in case it changes.
Suffice to say, it is not (yet?) a very interesting picture. LCH SwapClear with a 99% market share in €STR when measured by the DV01 traded. Will this change over time?
In Summary
- The data speaks for itself in the on-going three way battle for dominance in €STR futures.
- The Clarus API summarises the most relevant volume metrics in an €STR Liquidity Dashboard.
- The continued evolution of trading in €STR and EURIBOR products promises to be a stand-out feature of EUR rates trading in 2024.