SOFR Swaps Volumes and Share – July 2023

Amir Khwaja

9 months ago

Let’s update my blog on IDB Market Share in SOFR Swaps with the most recent data and expand the coverage to also include D2C venues.

SOFR Swaps trade as Outrights, SpreadOvers, Curves, Butterflys, Forwards/IMMs
Market Share can be determined using trade count, notional or dv01
Spreadovers are the largest in D2D trading
Outrights are the largest in D2C trading
We calculate share in dv01 terms for the April-July period
In D2C Outrights, Tradeweb 61%, Bloomberg 37.5%
In D2C Forwards/IMM, Tradeweb 70%, Bloomberg 28%
In D2C Curves, Bloomberg at 52%, Tradeweb at 48%
In D2C Butterfly, Tradeweb 51.5% and Bloomberg 48%
In D2D Spreadovers, ICAP leads with 48%, BGC next with 21%
In D2D Curves, ICAP leads with 36%, Tradition with 25%
In D2D Butterfly, Tradition leads with 46%, Dealerweb with 20.5%
In D2D Butterfly, Dealerweb has gained share to move into second
See below for all the charts and details

Types of SOFR Swaps

SOFR Swaps in the IDB (inter-dealer broker, D2D) market trade primarily as Spreadovers to US Treasuries. This is by far the most frequent trade type in D2D, with the highest volume in notional or dv01 terms and the most important in setting prices of SOFR Swaps.

In dealer-to-client (D2C) trading the most common trades are Outright SOFR Swaps and these trade in very large volume in trade, notional or dv01 terms; generally greater than D2D Spreadovers.

Curve/Switch trades, which are relative value trades, taking a position on the spread between standard tenors (e.g. 5y10y) to narrow or widen and trade as either SpreadOver or Outrights. These trades do not have a direct impact on swap prices, but they do have second order impacts on the price levels.

Butterfly trades are similarily used for relative value between tenors e.g. 2y5y10y, trade in large size and have second order impacts on price levels, again either as SpreadOvers or Outrights.

As well as these main types, there are also:

Forwards, which start not on spot but on a forward date e.g. 1Y
IMMs, with dates that match CME SOFR Futures, for relative value or invoice spread trading
CCPSwitch trades, which move risk from one CCP to another, either CME to LCH

Let’s look at these in turn, focusing on the market share of each trading venue in D2D or D2C.

SOFR Spreadovers

Starting in SDRView with D2D Spreadover trade counts by month and plaform identifier.

D2D SOFR Spreadover trade counts (1-Apr-2023 to 31-Jul-2023)

Each month with at least 2,000 trades (and not shown, with gross notional > $140 billion pm)
ISWV, which is ICAP Global Derivatives, the largest with around 1,000 trades a month
ISWV share close to 50% of the trade count volume.

Let’s switch next to selecting DV01, a measure that equalises notional by tenor into comparable risk, is a better proxy for share of customer wallet and expressing the results as a percentage share.

D2D SOFR Spreadover percentage share by dv01

ICAP share ranging from 50.4% to 45.8%, an average of 48.25%
BGC share in the 22.6% to 17.7% range, an average of 20.65%
TPSE, Tullet share in the 12.5% to 14.3% range, an average of 13.6%
TSEF, Tradition share in the 7.8% to 12.4% range, an average of 10.2%
DWSF, Dealerweb share in the 6.7% to 7.7% range, an average of 7.3%

SOFR Outrights (Spot starting)

Next, lets switch to D2C venues and look at volumes and share of spot starting outright SOFR Swaps.

D2C SOFR Outright (spot-start) trade counts

Each month with 7,500 to 8,500 trades (and gross notional > $400 billion, not shown)
So between 3 to 4 times the volume we saw in D2D Spreadovers
Bloomberg and Tradeweb, each with 3 venues (US, UK, EU)
Volumes look similar on BBSF and TWSF, a little higher on the former

As before, in SDRView we can switch to DV01 and display percentages.

D2C SOFR Outright (spot-start) share by dv01

TWSF, Tradeweb SEF the largest with an 61.25% average share
Much higher in dv01 terms due to more notional in longer tenors than BBSF
BBSF, Bloomberg SEF with 37.5% average share
Cummulative share of the UK & EU venues is 1.25%
BMTF and TREU, the UK venues a touch larger than BTFE & TWEM the EU venues

SOFR Outrights (Forwards and IMM)

Next, lets stick with D2C venues, but change from Spot starting to Forwards and IMM SOFR Swaps.

D2C SOFR Outright (Forwards/IMM) trade counts

Each month with 3,400 to 5,000 trades (and gross notional > $200 billion, not shown)
So over 50% of the volume we saw in D2C spot starting outights
Volumes on TWSF are 2 to 3 times higher than on BBSF (and higher in IMM than Forwards)

As before, in SDRView we can switch to DV01 and display percentages.

Tradeweb SEF the largest with average share of 70.1%
Bloomberg SEF with 28%
Tradeweb (UK) with 0.59%, Tradeweb (EU) with 0.36% and Bloomberg (UK) with 0.15%

SOFR Curve/Switch trades

Turning to Curve trades (e.g. 5y10y), we will start with D2C venues.

D2C Curve SOFR Swaps (spot-start) trade counts

Counts (package adjusted) selected in SDRView, to avoid double-counting (each leg)
Around 1,200 trades each month
Bloomberg with more trades than Tradeweb, approx. 60% to 40% share
Notional (package adjusted) $40 billion each month, so much smaller than Outrights or Fwds/IMMs

For the sake of brevity, I will skip showing the chart of DV01 share, but state that this shows an average share for the period of BBSF of 52% and TWSF with 48%.

Next lets turn to D2D venues and Curve/Switch trades, generally as Spreadover.