We’ve skipped a couple of newsletters but as you know, there has been a lot going on in the wider market and at CurveGlobal, so it’s good to be back. In the last few weeks, we’ve continued to deepen our engagement with both liquidity providers and our sell-side client base. We think this is important, as Curve is genuinely an industry partner with a mission to enact change.
Breaking down the vertical silos that dominate the futures markets is not just Curve’s raison d’etre but a heartfelt goal that can provide demonstrable economic benefits to all participants.
The great news is that we are consistently seeing volume going through and record open interest (breaking 100K this week), with sustained activity from sell-side participants, many of which are of course shareholders in Curve. In fact, more participants are expected to join in the near future. What I’ve also wanted to stress – and perhaps haven’t enough – is how much our ‘open access’ philosophy resonates with the people we are speaking to.
Open access means we want you to be able to trade, clear and margin where it makes sense for you, not us. We know that for some of you, there can be compelling OTC versus futures margin offsets to be had at Curve/LCH, while for others the attraction is lower fees and transparent, competitive pricing. But the point is, you get to choose. We hope in the months ahead, more and more of you choose Curve.
Over the weekend of 22nd/23rd April, in response to customer requests, we successfully ported the remaining futures positions at LCH that were traded on NLX to CurveGlobal products. This added a little over 30,000 lots to our Open Interest and took us through 100,000 lots of OI for the first time.
Thank you to the firms who owned those positions as well as the staff at NLX and LCH who all worked collaboratively to ensure that this conversion went smoothly.
As well as the increase in open positions this conversion also brought brand new market participants to CurveGlobal, meaning more firms can take advantage of the efficiencies available from CurveGlobal.
CFTC PROVIDES PORTFOLIO MARGINING GREEN LIGHT
LCH is now permitted to offer portfolio margining of interest rate futures and OTC IRDs for US and non-US clients of FCMs. This approval opens the door to clients using US FCMs for clearing into LCH SwapClear to clear CurveGlobal futures and LCH Spider for portfolio margining.
All CurveGlobal products are now certified under the LSEDM FBOT approval. This means that we can now offer US clients CurveGlobal products. We can also provide members and other US participants with direct access to the electronic order entry and trade matching systems on the exchange, allowing CurveGlobal products to be traded globally.
*OI figure for the week of 28/04/2017 is taken as at COB 26/04/2017
*Volume figures for the week of 28/04/2017 is based on flat average being taken from 24/04/17 to 26/04/17 (inclusive) and extrapolated across the 5 day working week period
RED AND WHITE STIRS FOR FREE!
You may be able to add more than 25x the notional of your swap portfolio in futures before your IM is impacted by using CurveGlobal! Not only this but if these futures were traded on another exchange and cleared at another CCP, they would incur a charge to cover the default risk at that CCP.
Take a look at the chart below to see the potential impact in more detail. If we take a diversified portfolio of OTC products in multiple currencies and tenors* representative of typical OTC portfolios at SwapClear, and then add an increased amount of short-dated STIRS to the portfolio, your IM exposure may be protected.
*Portfolio composition: 4% AUD, -38% CAD, 49% EUR, 15% GBP and 70% USD; 50% 2yr, 22% 5yr, 18% 10yr, 7% 30yr, 3% 50yr.
Chris Bennett, Business Development
Chris has extensive trading and business experience in Europe, Singapore and Hong Kong. After a trading career that began in the LIFFE pit in the late-1980s (where he was nicknamed “Joe 90” for his stylish glasses), and ended with the creation of his own proprietary trading firm, he’s most recently played a key role in the sale of an Asian commodity exchange to the Deutsche Borse Group and growing the European and Asian business of an American financial software startup.
How will transparency obligations under MiFID II impact package orders? This was the subject of a recent seven-week consultation from ESMA which closed last quarter.
Following the “Quick Fix” amendments made to the Level 1 MiFID text last summer, ESMA was tasked with developing draft regulatory technical standards (RTS) to determine in which cases a package order can be considered “liquid as whole” (rather than in its constituent underlying parts). The significance is that where a package order is considered liquid, certain pre-trade transparency waivers would be unavailable and full MiFID II transparency requirements would apply. This could potentially change how packages are traded today.
Working in partnership with our LSEG colleagues, our response to the consultation suggested an alternative framework with the creation of a matrix of different instrument types in addition to further asset-class specific criteria.
CurveGlobal will continue to engage and work with the industry as the requirements governing package orders are finalised.