Almost 9 years to the day of our first blog, Shining a light on Derivatives, covering the Swap Data Repository (SDR) operated by DTCC for the Commodity Futures Trading Commission (CFTC) regulations, it is exciting to see data from the SEC SDRs; long over-due in our view and we will refer to these as SBSDRs (security-based SDRs) to differentiate from (CFTC) SDRs.
Exciting and momentous enough for me to use an ! in the title, the first time I can remember doing so, though with 393 blogs now, it is difficult to be sure.
The Dodd-Frank Act established a framework for regulating the over-the-counter swaps markets. Title VII of that Act divided regulatory authority over swaps between the SEC and the CFTC.
CFTC regulated SDRs, operated by DTCC, ICE and CME provide public dissemination of swap transactions entered into by US persons for Foreign Exchange, Interest Rates, Credit, Equity and Commodity OTC Derivatives, and have done so since January 2013.
The SEC has authority over “security-based swaps,” which are broadly defined as swaps based on (1) a single security or (2) a loan or (3) a narrow-based group or index of securities or (4) events relating to a single issuer or issuers of securities in a narrow-based security index.
The importance of this is that for the first time transactions in products such as Credit Default Swaps on single-names (CDS) and Total Return Swaps on Equities (TRS) are being made public, showing details such as execution time, price size, reference entity and maturity.
(Note, while the DTCC Trade Information Warehouse reports have provided aggregated and delayed single-name CDS transaction data for many years (2006?), as we have always argued in this blog, transaction level data is the gold standard, becuase any aggregation or delay invaribly leads to loss of information.)
Echoing Chairman Gary Gensler’s statement, credit derivatives played a role in the 2008 financial crisis (remember AIG or the Big Short Movie) and total return swaps in the Archegos collapse, so it is great to see transaction level data that provides granular and timely information to market participants and the public.
The SEC SBSDR web page shows that two firms have filed applications for SBSDRs:
- DTCC DDR for Equity, Credit and Interest Rates asset classes
- ICE Trade Vault for Credit asset classes
The DTCC GTR North America website now shows sub-pages for SEC, (as well as the CFTC and Canada), with details for reporting firms and the DDR real time dissemination platform.
And the ICE Trade Vault Noth America website now shows SEC, as well as CFTC and Canada with details for reporting firms and the real-time ticker.
Let’s take a look at what the data shows for Credit and Equity.
Starting with the Credit Derivatives on February 14, 2022, the first day of public dissemination.
Assuming the Clearing Indicator is published reliably, out of a total of 832 trades, 210 are cleared (intent).
And Execution Venue is Off or Blank for 774 trades, leaving just 58 with On or a Platform identifier.
Of-course far more interesting is that there are 60+ fields in the public dissemination data and while some are only applicable for specific products or use cases, a wealth of interesting data is available including:
- Execution timestamp
- Product identifier
- Effective and Expiration dates
- Underlying Asset Id / Reference Id
- Underlying Asset Name / Reerence Name
- Notional amount (but capped at $5m)
- Price (spread in bps)
- Other payment amount
- Fixed rate
- Payment frequency
Let’s take a deep-dive into details such as CDS on IBM as an example:
- 34 transactions on the IBM reference entity
- 20 reported to ICE (all intent to clear), 14 to DTCC (6 cleared and 8 uncleared)
- 20 transactions capped at $5m notional and 14 with lower amounts ($700k, $2m, $3m, $4m)
- Maturities in 2Y, 3Y, 4Y, 5Y
- Prices ranging from 20 bps to 56 bps, depending on the maturity and trade
- Jun26 at 45.8 bps and Dec26 at 51.6 bps
There is a lot more data to look at, but for today I will leave it at that for Credit Default Swaps.
Next lets look at Equity Derivatives on February 14, 2022, the first day of public dissemination.
As we would expect, a much higher number of transacations in Equities than in Credit, with 266,534 in total, the majority in Total Return Swaps (TRS) on single stocks, followed by Contract for Differences (CFDs) on single stocks and a good number of transactions in baskets/index, which are ‘narrow’ based to fall under SEC regulations and not CFTC.
There is no clearing of Equity TRS or CFDs, so as we would expect all transactions are reported as Uncleared or Blank and execution venue as Off or Blank too.
As before, far more interesting is that there are 60+ fields in the public dissemination data including:
- Execution timestamp
- Product identifier
- Effective and Expiration Dates
- Underlying Asset Id (ISIN, RIC, SEDOL, …)
- Notional amount and quantity
Looking at specific trades, we can deep-dive into details such as TRS on a specific single-stock, though the use of different identifier schemes (ISIN, RIC, ..) and no underlying asset name populated on the record, make our task harder. As an example, let’s look at TRS on underlying asset id TSLA.OQ, which is Tesla.
- 49 transactions on TSLA.OQ
- Ranging from 5 shares to 475 shares, none appear to be subject to capped amounts
- Some transactions with prices showing in the 850 to 900 range, which looks like the TSLA stock price
- Others with -15 or +20 bps, which is the spread on the funding leg
- A few trades with Expriation dates (Dec22, Feb23) but most with this blank
It is going to take some time to digest and understand the information in this data.
That’s all I have time for today.
SBSDR public dissemination is now live.
Transactions in Credit and Equity asset classes.
Published within a minute or so of execution time.
Credit Default Swaps on single-names.
Equity TRS and CFDs.
60+ fields with details of each transaction.
A huge amount of new data to look at.
Which we plan to do in future blogs.