RFR Trading November 2020
The ISDA-Clarus RFR Adoption Indicator has been published for October 2020. The headlines are: The RFR Adoption Indicator was 8.3%, a decline from the previous month (which saw an all-time high). This is the fourth highest reading on record. 5.6% of all USD risk was traded in SOFR vs 9.7% last month, reflecting the impact of the CCP discounting change. The switch to […]
GSIBs in 2020
The same 30 banks as in 2019 have been defined as GSIBs in 2020. JP Morgan, Wells Fargo and Goldman Sachs have all managed to move into lower tiers, requiring less capital. We look at the data behind the GSIB indicators using GSIBView, our latest data offering. Optimisation of the GSIB metrics is evident in […]
Will anyone trade LIBOR after 2021?
US regulators have announced that banks should cease entering into any new contracts referencing USD LIBOR from 31st December 2021. This is consistent with the announcement last week from the UK regulators, who pointed out that LIBOR fixings may be published after end-2021 but that no new business could be written against them. These announcements […]
Margin Calls Q2 2020
Public disclosures from CCPs reveal the maximum variation margin (VM) called each quarter. In the quarter to June 2020, VM has stayed at elevated levels compared to 2019. VM is running about 34% higher than Q4 2019 and 66% higher than this time last year. Funding daily VM puts complex demands on the industry. Understanding […]
Anonymous Trading on SEFs
The 1st November 2020 heralded a fundamental change in swaps markets. SEFs executing trades in specific products were no longer permitted to disclose the identities of the counterparties (to each other) after the trade: At the moment, this rule only applies to MAT swaps – i.e. those products subjected to the execution mandate and required […]
SOFR Swaps on SEFs
Last week I looked at Swap Volumes in October 2020 and focused primarily on SOFR Swaps and Futures at Clearing Houses, so this week I am going to look at Swap Execution Facilities (SEFs). D2D SEFs Let’s start by using SEFView to look at D2D SEFs, where the main product is SOFR v FedFunds Basis […]
ISDA-Clarus RFR Indicator: SOFR, So Good
The ISDA-Clarus RFR Adoption Indicator has been published for October 2020. The headlines are: The RFR Adoption Indicator hit 11.6%, a new all time high. This was up from 10.5% the prior month. 9.7% of all USD risk was traded in SOFR vs 5.8% last month, reflecting the increase in SOFR activity as a result of the CCP discounting change. […]
Swap Volumes in October 2020
In the transition from LIBOR to SOFR, the recent change by Clearing Houses to discount swaps using a SOFR curve instead of a FedFunds curve has long been trailed as a key milestone for higher volumes in SOFR derivatives. In today’s blog I look at how SOFR Swap volumes did in October 2020. I also […]
Libor pre-cessation announcement – risk challenges for non-cleared derivatives
In August I looked at the potential for valuation challenges as for non-cleared derivatives. This month I will cover the additional challenges for risk management and reporting that would arise with a pre-cessation announcement. A LIBOR pre-cessation announcement from the FCA could occur by the end of 2020. This was first discussed publicly in June […]
Libor Fallback Trade Valuations – A single trade example
As the financial industry moves towards the replacement of LIBOR the question asked is changing from what does IBOR Reform mean, to how I manage IBOR reform? A key subsequent question is “What is the change in value/change in risk of my LIBOR trade if it goes onto Fallbacks?” I thought that it would be […]