What Kinds of Volumes are Being Done on Cleared Interest Rate Swaps?

Volumes Compared by Currency

The CME Group's clearing solution for interest rate swaps is doing considerable volume.

For trade date February 26, 2016, $21.6 billion of swaps were traded, with $12.5 trillion open interest.  Dollar and Euro are trading around parity (with the Euro being slightly more valuable), so that's a 20 bn EUR equivalent trading volume.

Euro swaps traded only 5.2 billion euros worth in comparison. So the volume of USD swaps is approximately four times as large.

Swaps on GBP actually exceed USD swaps in trading volume terms, for the same day, 24 billion pounds traded, which is around $34 bn (which is about 1.5x larger).

Cleared Swaps on Different "Flavours of LIBOR"

The CME clear swaps on USD Libor, Euribor and plain old "LIBOR" (which is GBP LIBOR of course) as well as host of other currencies.

Where Are Rates At - USD Libor

Friday's level for USD Libor Overnight was 37 basis points.  1 month is 43 basis points and 3 month USD Libor is 63 bps. A daily update on USD Libor levels can be found here. 1year USD Libor is 116 basis points.

"Regular" LIBOR

Overnight is 48bps, 1 month is 50 bps, and 3 months is 59 bps. 1 year LIBOR is close to 100 bps.

Who sets the LIBOR Rates

The former BBA Libor is now known as ICE Libor following the reform of the benchmark and management by ICE Benchmark Administration.  The Wheatley Review of LIBOR in 2012 made specific recommendations for the reform of LIBOR including a change of administration.  Under a tender process led by Baroness Hogg, the NYSE Euronext came up trumps (later renamed to ICE Benchmark Administration). Both administering and making submissions to LIBOR became regulated activities from 1 April 2013 - LIBOR being the first benchmark to be regulated.

As part of their activities, ICE has a dedicated surveillance team identifying breaches of submission standards and tolerances through "a combination of alerts and pattern matching".

Other Benchmark Rates administered by ICE

The ICE Swap Rate is the new replacement for ISDAFIX effective August 2014. ICE also now administer the LBMA Gold Price.

The Greatest Volume of Swaps

Interest Rate Swaps, followed by Overnight Indexed Swaps followed by basis swaps.

Shell's "AA" Credit Rating Cut to "AA-" by Fitch due to Takeover of BG Group

Moody's has also said it is reviewing credit ratings of oil, gas and mining stocks. These companies are selling assets and slashing headcount due to the rout in commodity prices. On the flip side, the deal makes Shell the UK's largest publically owned company, with HSBC in second place. Shell rival BP is around number 6 in market cap.

Barclays pays $50m to Axiom Investment Advisors over Last Look Algorithm in FX

Barclays is paying $50m over its lawsuit from November 2015 with Axiom Investment Advisors, an asset manager specialising in foreign exchange. The "last look" is the opportunity taken by market makers to reject a trade after the client commits to a trade at a certain price, giving them the flexibility to reject unprofitable trades, a practice which is illegal in many jurisdiction and asset classes, and frowned upon in others. However, the specific complaint by Axiom relates to delaying execution of trades, resulting in a worse consummated final price than what was initially agreed. The investigation was led by the New York Department of Financial Services (DFS). Barclays has denied wrongdoing.

Trading GOI and KTB Bond Futures

INDIA - Government Bond Futures and Bills and Who can Trade Them

The National Stock Exchange (NSE) of India offers futures trading on government bonds (10-year) and (91-day) bills a.k.a. 91TDB. Trading members must be registered with SEBI to trade in the Currency Derivatives segment.

Price Quote Convention

Prices are quoted "clean" i.e. without considering accrued interest.

Settlement and Delivery of GOI Bond Futures

Bond futures settle on VWAP during the last thirty minutes of trading, or theoretical value. Note that the 10 year bond futures actually allows delivery of bonds with 8-11 years of residual maturity.

Clearing of Trades

Trades are cleared by NSCCL (National Securities Clearing Corporation Limited), a wholly owned subsidiary of the NSE incorporated in 1995, and the first clearing house to be incorporated in India, starting operations in 1996. Counterparty risk is avoided by cash settlement of the daily mark to market of open positions.

KOREA

Korean Bonds

AsianBondsOnline has good coverage of Korean Won bonds, and presentation of 2, 5 and 10 year yields. In Korea, all fixed income instruments are available to foreign investors.

Bond futures trade on KRX. They are known as KTB futures (Korean Treasury Bond futures), available in 3, 5 and 10 year varieties.

The wholesale market for KTBs is known as KTS (this is also the venue to trade Monetary Stabilisation Bonds, or MSBs and Deposit Insurance Fund Bonds (DIFBs)), and is limited to government bond dealers licensed by the Financial Services Commission (founded in 2008).

Deutsche Bank CDS Spike brings Excitement Back to Credit Markets

Deutsche's 5 year subordinated CDS rose to 540 basis points while one year subordinated CDS increased to 552 basis points. This means the Deutsche subordinated CDS curve is decreasing (a pattern of reversion which started appearing in the summer of 2007 during the credit crisis).

Should you wish to trade CDS speculatively there are some electronic trading options. MarketAxess (MKTX) provides a platform for trading single name CDS, CDS indices and index options. For single name CDS, they support streaming prices and a click-and-trade model as well as RFQ model.

Banks stocks sold off and people put money into gold and yen, which is trading at 113 to the dollar, down from a high of 121 yen on the 1st February 2016. The path of gold was slightly skewed as 1st February 2016 was a day of rising gold prices with a peak of $1258 per troy ounce. So whilst gold rose in response to the bank sell-off it was nothing like the peak earlier in the month, which coincided with a sell-off in the S&P.

ICAP CEO lauds "non-bank trading institutions" in Electronic Trading Arena

Lower EBS volumes and revenues prompts comments on "Non bank" traders

Michael Spencer, CEO of ICAP, remarking on the drop in revenue of his company in electronic markets, exemplified by the reduction in activity on his foreign exchange platform, EBS, has praised the "non-bank trading institutions" such as Ken Griffin's Citadel and Virtu Financial Inc. which are coming in to fill the void left by retreating banks.

Focusing on Technology

Low interest rates have dampened activity from banks in the fixed income, currencies and commodities space in which brokers operate, inciting them to reorient their focus. In particular ICAP is investing in electronic markets, post-trade services and information services. ICAP has also expanded into fintech investment via its Euclid Opportunities initiative since 2011 run by Steve Gibson who was also at Calypso Technology previously.

Stock and Competitors

ICAP stock (IAP.L) was pressured downward following the results. It is regarded as riskier than the overall market with a beta of 1.17. It has a market cap of around 2.69 billion pounds. Its competitors include Tullet Prebon (which is buying ICAP's voice broking business) and Cantor Fitzgerald, which also runs its own investment arm, Cantor Ventures. They also have Cantor Gaming as one of their high technology ventures. Tullet's share price has also been going down, but it has a beta of only 0.75 so the impact, as can be predicted, is rather less than on ICAP.

Global Bond Rally Pushes Yields to Low Levels

Investors are buying up sovereign debt as equities slide - sending US Treasuries yields to a one-year low. Bond indices, such as the BAML World Sovereign Bond Index also tumbled to 1.29 percent, it's lowest value since 2005. Japan's 10 year yields went negative.

National Australia Bank brings Challenger CYBG to the London Stock Market

The National Australia Bank brought CYBG to the LSE on 8 February 2016. The trading service for the stock is SETS, the London Stock Exchange's flagship order book. The CYBG will form part of the FTSE Banks segment with a market capitalization of £1.66 billion on listing. CYBG forms one of the UK's so-called "challenger banks".

The CEO of CYBG is David Duffy who joined in 2015. He was formerly CEO of Allied Irish Bank which has a close relationship with the Irish state.