Clarus Financial Technology

Has Swaptions Clearing Begun?

We’ve written quite a bit about swaptions clearing in our blog.  I was surprised to see that the first article was over 4 years old – back when the industry (and Gensler!) began talking about it:

In the most recent article in March 2016, Amir ended up wondering how quickly firms would take up swaption clearing.

Well, we know the answer to that:  they didn’t.

But something is perhaps changing.  Lets look.

DATA

If we use CCPView, and look at weekly volume back to the launch of swaption clearing (April 2016), we see only a couple trades cleared at launch, and then nothing cleared in 2017.

 

That is, until last week, when CME cleared over $500m of swaptions across 5 days, as seen in this daily chart from CCPView.

 

 

CME also put out some details on their website about the progress:

 

So, how much can we see about these cleared trades on the SDR?  This part is a bit unfortunate.  I ideally wanted to go see the cleared trades, see if they were straddles, payers, receivers, etc, but…

Swaptions Trade counts as reported by the SDR, separated by Cleared/Uncleared

It seems the SDR data only show 7 cleared trades over the week (as opposed to the 30 quoted by CME).  Why doesn’t the SDR show all the cleared swaptions?  Likely because either:

If you’re wondering if any cleared swaps were traded on a SEF – no, none of the 7 we see as cleared were on SEF.

SUMMARY

CME reported a good number of swaptions clearing activity last week.

My takeaway is that participants may just be taking this seriously now, particularly given the uncleared margin rules.

A case of clients testing the pipes?  Perhaps.  We’ll be able to see if this continues.

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