Under the Dodd-Frank Act, Clearing for Interest Rate Swaps became mandatory on March 11, 2013 for Swap Dealers (SD), Major Swap Participants (MSP) and Active Funds (AF).
So I decided to look at the DTCC DDR trade repository for evidence of an uptick in Cleared vs UnCleared IRSwaps.
I was very surprised to see no evidence in the trade data for this. The daily trade counts and gross notionals for IRSwaps:FixedFloat do not show any material change between Cleared and UnCleared percentages. For USD the percentage of Cleared swaps remains around 50% of the total, while for EUR it remains around 67%.
What could be the reason for this?
I can think of the following:
- Firms have already been clearing well before the March 11 date, so there was no sudden rush for firms to start clearing on this date.
- Firms that have not been clearing and are now required to clear, have simply missed the deadline.
- There are firms other than SDs, MSPs and AFs, that are responsible for the UnCleared Swaps and the mandatory date for them to clear is later in the year.
- The product type IRSwap:FixedFloat also captures deals that are not currently clearable at LCH or CME.
- Two days is too early to draw any statistical conclusions.
- The trade feeds to DDR, are somehow lagging what is actually happening.
Take your pick.
Or if someone reading this has a better explanation, please comment on this post or email us.
In the meantime, I am going to keep checking our DDR View each day.
Fingers crossed in anticipation.
2 thoughts on “Mandatory clearing, is it really happening?”
I vote option 1 and maybe option 5
So on T+3 (yesterday) we have some evidence of an uptick in Cleared percentages. EUR Swaps hit 87% from a previous daily high of 72% and USD Swaps hit 69% from a previous daily high of 58%. So yesterday there were 421 USD Cleared Swaps reported with notional of $24b and 190 UnCleared Swaps with notional of $7b, so 80% in notional terms were cleared. Looks good. No significant uptick in JPY, GBP or any other currency. So lets see next week what the figures show.
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