Swaps data: CCP and Sef volumes still growing

With three quarters’ worth of swaps data now in, it’s a good chance to take stock of overall volumes and the competitive picture across a range of products and currencies. In short, the story is that volumes are growing, but not for all central counterparties (CCPs) and swap execution facilities (Sefs) – some are growing faster than others; some are down year-on-year.

Global cleared interest rate swaps

First let’s look at quarterly gross notional of interest rate swaps in major currencies – Australian dollar, Canadian dollar, euro, sterling, US dollar, yen – as reported by clearing houses.

Figure 1 shows:

• Strong growth in 2017 over 2016, with each quarter higher than the corresponding quarter a year earlier.
• LCH SwapClear the largest with $29 trillion in the third quarter of 2017, up 30% year-on-year, and a year-to-date market share of 85% by gross notional.
• CME with $2 trillion in the third quarter of 2017, down 19% from the same period last year, and a year-to-date market share of 7%.
• The Japan Securities Clearing Corporation (JSCC) with $2 trillion in the third quarter, down 12% (in US dollar terms) from the third quarter in 2016 and a year-to-date market share of 6%.
• ASX with $620 billion in the third quarter, up 57% year-on-year (in US dollar terms) and a year-to-date market share of 2%.
• Eurex with $170 billion in the third quarter, up 107% (in dollar terms) from the same period a year earlier.
• Spain’s Bolsas y Mercados Espanoles (BME) with $700 million so far this year.

So the cleared interest rate swap market continues to grow, with a strong growth rate of 30% at the market leader LCH SwapClear, as well as exceptional growth from a lower base at ASX and Eurex, while both CME and JSCC are down in the most recent quarter from a year earlier.

US swap execution facilities

Next, volumes reported by US Sefs for interest rate swaps in the same six currencies.

Figure 2 shows:

• Strong growth in 2017 over 2016, with each quarter higher than the corresponding quarter a year earlier.
• Tradeweb the largest with $3 trillion in the third quarter of 2017, up 63% from the same period last year, and a year-to-date market share of 33% by gross notional.
• Bloomberg with $2.2 trillion in the third quarter, up 42% from the third quarter in 2016 and a year-to-date market share of 25%.
• TP Icap is the largest interdealer player with $1.25 trillion in the third quarter, up 24% year-on-year, and a year-to-date share of 16%.
• IGDL, which is owned by TP Icap but managed separately, has $500 billion in the third quarter, down 9% from the same period last year, and a 7% year-to-date market share.
• Tradition with $670 billion in the third quarter, down 13% year-on-year, and a 10% year-to-date market share.
• TrueEx with $520 billion in the third quarter, up 67% from last year and a 6% year-to-date market share.
• BGC with $345 billion in the third quarter, up 73% year-on-year and a 4% year-to-date market share.

In summary, excellent growth at the three dealer-to-client Sefs: Bloomberg, Tradeweb and TrueEx, in part driven by portfolio maintenance compression and roll activity, with Tradeweb now established as the largest. For dealer-to-dealer Sefs, TP Icap is the leader with gains in the third quarter, while IGDL and Tradition are down during the period, possibly due to lower CME-LCH central counterparty switch volumes.

Interestingly, the cumulative volume reported by US Sefs in 2017 is $26 trillion and represents 24% of global cleared volume of $108 trillion.

Global cleared forex non-deliverable forwards

Cleared volumes for forex NDFs have benefited from the implementation of new margin rules for the non-cleared product, with volumes hitting new records.

Figure 3 shows:

• LCH ForexClear with $1.5 trillion in the third quarter of 2017, up 400% from the same period last year, for a year-to-date market share of 95%.
• Comder with $73 billion in the third quarter, up 16% year-on-year, for a 5% share.

NDF volumes at US Sefs

US Sef volumes, however, do not show the same trend.

Figure 4 shows:

• Increases in 2017 but nothing like that seen for cleared volumes, which is due to the fact that clearing for NDFs happens post-trade and not at the point of execution, so the volumes here represent overall market activity, of which an increasing volume is now being cleared.
• The combination of TP Icap is the largest, with $800 billion in the third quarter this year.
• BGC is next with $194 billion in the third quarter.
• Nex started reporting in the most recent quarter.

The cumulative volume reported by US Sefs in 2017 is $3.8 trillion and equivalent to 92% of the global cleared volume of $4.1 trillion, which given there is significant NDF trading in Europe and Asia, suggests there is some way to go before cleared NDF volume growth slows down.

Global cleared CDS index

Figure 5 shows:

• Volumes for the third quarter of 2017 are up versus the same period in 2016, but previous quarters in 2017 were down.
• Ice Clear Credit is the largest clearer with $2.4 trillion in the third quarter, up 29% year-on-year for a year-to-date market share of 76%.
• Ice Clear Europe has $536 billion in the third quarter and is up 30% year-on-year.
• LCH CDSClear has $152 billion in the third quarter and is up 50% in dollar terms from the same period last year.
• CME has announced the closure of its CDS service and JSCC does not register on the chart.

In summary, strong growth from the market leader Ice, and strong growth from a lower base for LCH CDSClear.

CDS index volumes at US Sefs

Figure 6 shows:

• A similar trend to figure 5, with the third quarter of 2017 up from the same period in 2016.
• Bloomberg by far the largest with $1.5 trillion in the third quarter, up 29% year-on-year and retaining the lion’s share of the market.
• Tradeweb is next with $318 billion in the third quarter, up 26% from last year for a year-to-date share of 15%.
• TP Icap combined with $72 billion in the third quarter, which is flat compared with the same period last year.
• The rest all barely adding to their small share of the market – meaning Bloomberg and Tradeweb are capturing all the growth.

Amir Khwaja is chief executive of Clarus Financial Technology.