04.23.2015

SEFs Show Increased Trading Activity

04.23.2015
Terry Flanagan

More than half of interest rate derivatives and over 70% of credit default swap index average daily notional volumes were traded on swap execution facilities in the first quarter of 2015, according to a review of trading volumes published by the International Swaps and Derivatives Association.

Analysis compiled by Isda’s SwapsInfo website, which is based on U.S. swap data repository data, shows electronic trading has continued to grow as a proportion of overall trading activity following the introduction of the first SEF trading mandates in the U.S. in February last year. SEF trading accounted for 54.5% of total IRD average daily notional volume in the first quarter of 2015, compared with 52.4% over the whole of 2014.

A similar trend occurred in the market for CDS indices: SEF trading accounted for 70.7% of total average daily notional volume in the first quarter of 2015, compared with 62.5% in 2014.

In addition, a large proportion of average daily IRD and CDS index notional volume is now cleared. Cleared trades comprised 72.5% of total IRD average daily notional volume in the first quarter, compared with 76.5% over the whole of 2014 and 71.7% in 2013. Just over 80% of CDS index average daily notional was cleared in the first three months of this year, compared with 74.7% in 2014 and 37.7% in 2013.

“Our research shows that electronic trading volumes continued to play an important part of total trading activity in the first quarter of 2015,” said Isda CEO Scott O’Malia in a release. “In addition to the increase in SEF trading, market participants are continuing to clear the majority of their interest rate derivatives and CDS index trades.”

Total IRD average daily trade counts continued to climb during the first three months of 2015, both on a year-on-year and quarter-on-quarter basis.

SEF trading for IRD increased in terms of trade count on both a year-on-year and quarter-on-quarter basis. Average daily notional volumes were lower than the peak in the first quarter of 2014, but were higher compared with the fourth quarter of 2014. The average trade size on SEFs increased slightly during the first quarter of 2015.

SEF trading accounted for 46.4% of total IRD trade counts in the first quarter of 2015. On average, 59.3% of total IRD trade count was cleared.

The Isda SwapsInfo Quarterly Review analyzes IRD and CDS index trading activity. IRD and CDS index notional volume and trade count data is taken from the ISDA SwapsInfo site, which uses publicly reported data from Depository Trust & Clearing Corporation and Bloomberg US swap data repositories (SDRs).

Featured image via Dollar Photo Club

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