- We saw record cleared volumes in vanilla IRS in June 2018.
- We take a look at the data behind these records.
- SDR data covers 60% of cleared volumes in USD swaps.
- SDR data also covers non-USD swaps and we quantify exactly what proportion of the market it covers.
Introduction
With MIFID data soon to be made accessible, I thought I would do a quick status check as to what kind of transparency we already enjoy – excluding European data. It’s a common question we get from future clients – what percentage of the market does US SDR data actually cover?
This will vary from asset class to asset class. We’ve answered the question previously for NDFs – it is 38% for FX. But the largest market that is covered is Interest Rate Swaps – so let’s look at vanilla IRS.
Clearing and the Global Market
There were two charts that spurred me on to revisit this question this week. Firstly – June 2018 was a record ever month for cleared vanilla IRS. As was the first half of 2018 for LCH:
Latest records from @LCH_Clearing: #SwapClear cleared over $575.8 trillion in notional in H1 2018, an increase of 23% from H1 2017; Compression activity also increased by 24% year-on-year, with over $387.6 trillion compressed in H1 2018 https://t.co/UAYeOXEX5J
— LCH (@LCH_Clearing) July 3, 2018
Look at the continual growth we’ve enjoyed in Cleared vanilla IRS in the past 18 months:
Showing;
- Cleared vanilla IRS notional volumes hit $11.96trn last month.
- We know this from CCPView. We take the public data directly from CCPs themselves, and as such this is the golden record for Cleared volumes across the global market.
- Have a look at the list of 13 CCPs listed above. We don’t think we are missing any who have activity in IRDs. Please let us know if you think otherwise!
So we are at all time record cleared volumes. And then I remembered that virtually all volumes reported to SDRs are now cleared. From our SDRView product:
- Percentage of vanilla IRS that is Cleared and reported to SDRs.
- This covers all 42 currencies – so even includes currencies that are not offered for clearing anywhere.
- Despite this, there is still a huge 97.7% of notional in vanilla IRS that is cleared.
I therefore thought to myself – with more and more SDR data cleared, and with global cleared volumes growing – which is growing quicker? Does SDR transparency data now cover more of the market than ever?
USD Swaps Market
I’ll look first at the poster child of SDR data – vanilla USD swaps. How much of the global market is covered by SDR data?
- Nearly 60% of the USD IRS market can be covered by SDR transparency data.
- Of this data, around 70% is transacted on-SEF.
- The proportion of the market covered in any given month is surprisingly variable (a range of 38-58%). This is probably because we are measuring on a notional basis, instead of using DV01. Look out for some new data from Amir soon that will allow us to measure this on a risk-adjusted basis.
- Off-SEF data continues to be an important source of transparency (~30% of USD SDR volumes).
On average, over the past 18 months, SDR data has covered almost exactly 50% of the global market.
Non-USD Swaps
How much of the global market, excluding USD swaps, is covered by SDR data?
- Consistently 25% of the global market is reported to SDRs.
- This is almost identical month by month (23-28% range).
- Off-SEF data is a larger data source than on-SEF data for these non-USD markets.
In Summary
- Cleared swaps enjoyed a record ever month, seeing $12trn in vanilla IRS traded.
- 97% of swaps reported to US SDRs are now cleared.
- SDR data now accounts for nearly 60% of the overall USD market.
- SDR data accounts for 25% of all other markets.