Hi all,

When you’re starting a new business it's easy to look at the daunting list of things that need to be done to achieve success – and see nothing but problems in front of you. Fortunately, this past month has not been like that. We’ve onboarded a number of new hedge funds that have already begun trading, we’ve seen record volumes, all-time open interest highs, and new banks have signed up both to trade and clear CurveGlobal futures.

We can’t be sure whether it’s our innovative approach that is drawing business or the desire of participants for a more competitive marketplace. Either way, it’s worth noting that 90% of the H1 2018 SONIA* futures volume was in the CurveGlobal® Three month SONIA futures.

What continues to impress me is the quality of the market available on the platform. We often have the best price in the market on the screen, data we’ve shared with the regulators. What is even more exciting is the interest that’s being worked by brokers inside the spread.  

With a small block size we allow people to blend bid and offer pricing – further increasing the efficiency of the market. The move to ½ a tick on the CurveGlobal® Three month Sterling future continues to drive interest – for example, on 20 June we were exclusively best price in Sterling Whites for 24.9% of the day.  

How long before our competitors copy this innovation? If just 25% of the market traded on ½ a tick, that would reduce execution costs (mid/bid) by c. £200M for the year for the whole street – a meaningful saving. If you’re trading on EUR or GBP short-end listed rates products, ask us to help you with some analysis – we can tell you if you could get the same, better or worse prices on the trades you did last month.

People often tell me how “hard” it is to join a new exchange, but with CurveGlobal that just isn’t the case. We list our products on London Stock Exchange’s derivatives markets and clear them at LCH – so not a new build, but an add-on to existing infrastructure, something our 12 live (and growing) GCM’s can comment on.

Data is free, so you can monitor the pricing. However, if you want me to share the Bloomberg launchpad showing pricing across a couple of markets, please give me a shout. A number of independent software vendors offer combined order books and smart algos. It’s that simple.

I wish everyone a good summer – look out for our next newsletter in September.

All the best,
Andy Ross
aross@curveglobalmarkets.com

*Sterling Over Night Index Average (SONIA), benchmark administered by the Bank of England.

Trade Concept 

CurveGlobal® Three month SONIA Futures – accrual process

By: Ian Murphy and Milain Thakkar

It was noted in the last newsletter that the front Jun18 SONIA future contract would enter its accrual period on Wednesday 20 June and the colour naming convention would change from “front white” to “aqua”.  

On Wednesday 20 June the “front white” Jun18 Three month Sterling and the Inter Commodity Spread (ICS) priced SONIA minus Sterling both expired.  

The accrual period for Jun18 SONIA will be completed with the last relevant SONIA fixing for Tuesday 18 September (published T+1).

The SONIA calculations and day counts are familiar to many but for those who are new to the concept of daily accrual here are the results of a simulation for a Mar18 SONIA future. 

Mar18 accrual simulation 

EDSP Calculation

The EDSP shall be calculated by reference to the Overnight Index Average rate as calculated and published by the Bank of England in respect of each business day (on a T+1 basis) during the Accrual Period.

Dates

• Calendar days in the accrual period – 91

• Date of first SONIA fix – Wednesday 21 March, rate 0.4667%

• Date of last SONIA fix – Tuesday 19 June, rate 0.4507%

• There were no Bank of England Official Bank Rate changes during this accrual period

• On 23 April the Bank of England reformed SONIA and began publication on a T+1 basis

Day counts

• For business days Monday through Thursday the daily accrual is 1/91

• For weekends the rate published for Friday is used for the weekend period calculation

• There were 10 ordinary “2” day weekends, where Friday’s rate was applied as 3/91

• There were two “3” day weekends with a single Bank Holiday and the Friday rate was applied 4/91

• Easter Weekend was a 4 day period and the rate set for Thursday 29 March was applied 5/91

The Mar18 accrual simulation

• The simulation for Mar18 produced an interest rate accrual of  0.45658765 to 8dp

• This rounded to 4dp and the rate was 0.4566, this becomes the R

• The futures EDSP formula 100-R is applied

• The simulated Mar18 EDSP was 99.5434

The current accrual for Jun18 CurveGlobal® Three month SONIA

• First SONIA fixing Wednesday 20 June was 0.4495%

• Two ordinary 2 day weekend have occurred

• The current accrual level, including Tuesday 3 July, is 0.07139562

CurveGlobal Product Contract Specification
Contract Specifications and Bilateral Trade Rules

Monthly Volumes and Open Interest

Team Spotlight 60 Seconds with...

Ralph Bird, Head of Product Development at CurveGlobal

1. What are you listening to/reading these days?

I recently bought a copy of Economic Facts and Fallacies by Thomas Sowell. It’s a must read for anyone trying to understand the modern world and why so many government initiatives and programmes suffer from “unintended consequences” and turn out to be disasters.  

I very rarely read novels these days, but my sister-in-law sent me No Middle Name, a collection of Jack Reacher short stories, which is great escapism. Apart from that I like to read Private Eye and keep up to date with the news online – especially The Times and Telegraph. 

The other day I googled Pompeii, having just got back from holiday in Italy where we visited the archaeological site, and came across a YouTube video of Dave Gilmour’s concert there in 2016.  Since then I have been listening to the music of my school days – Pink Floyd, Led Zeppelin, Genesis etc. This makes a welcome change from listening to Andy singing Andrew Lloyd Webber hits in the office! (Or is he singing “Don’t cry… 4-3 Argentina”?)
 
2. What is the one thing you can’t live without?

Diet Coke. Everyone in the office knows that's the only thing I drink – they don’t bother asking if I want tea or coffee anymore.
 
3. If you could invite any four dinner guests past or present who would you choose?

It could be a bit hit and miss trying to get four strangers to gel at the dinner table, so I’d go for four members of the Monty Python team (from the early 1980s, just after Life of Brian and before The Meaning of Life – when they were still funny).  

If that’s cheating, how about Brian Clough? One of the greatest football managers of all time – the winner of consecutive European Cup titles with Nottingham Forest, my childhood team. And Jurgen Klopp – Liverpool FC’s manager (his entertaining character wouldn’t go amiss). I doubt Brian’s methods would work these days but Jurgen needs some inspiration if he’s ever going to win a European final.  

Sticking to the sporting theme, I would complete the table with Sir Clive Woodward and Eddie Jones – England’s Rugby Union World Cup winning coach and his current counterpart. Maybe between us we could work out a winning strategy for the England team in Japan next year.
 
4. You can do any job for just one day, what would it be?

I’ve always wanted to be a portrait artist. I enjoy sketching, drawing and creating caricatures, but I’ve never learnt how to use paints properly – one day I will go on a painting course to find out. (Then I could finish the caricatures I did of the CurveGlobal team last year!)
 
5. Ten years ago, where did you think you would be now?

Retired, living at home with just my wife and the dogs – and the children finally moved away!
 

Press Articles of Note

TURNING POINT IN JOURNEY TO LESS RISKY RATES
YORKSHIREPOST.CO.UK

BENCHMARK TRANSITION SPOTLIGHTS FUTURES TRADING 
MARKETSMEDIA.COM

LIBOR TRANSITION RAISES BASIS RISK FEAR
RISK.NET

BENCHMARK REFORM POSES CHALLENGE FOR VALUATION TEAMS 
RISK.NET

CLEARERS DIVERGE ON SOFR SWAPS DISCOUNTING 
RISK.NET

Come Visit us Here

FIA // 34th ANNUAL FUTURES & OPTIONS EXPO
FIA EXPO CHICAGO
16-18 October // Hilton Hotel // Chicago

FI // FIXED INCOME LEADERS SUMMIT
FIXED INCOME LEADERS SUMMIT
6-8 November // Beurs van Berlage // Amsterdam

To find out more about CurveGlobal or to offer suggestions on improving this newsletter, contact us at +44 20 7797 1055​ or info@curveglobalmarkets.com.