Like a mirage in the desert sun, not everything is what it appears on trading platforms.
We’ve had a fantastic first half of the year. Volumes are up over 300% on 2018 levels and new participants are joining. During these six months, we’ve seen big changes in open interest (OI) – both up and down – without impacting pricing; a fantastic endorsement of our liquidity – which I’ll talk about later. CurveGlobal peak share of open interest in Three month Sterling reached 7.96% and Euribor – 7.7%; currently it is 5% and 6.50% respectively. We feel a double-digit share is just around the corner. But at the same time, we’ve seen a drop in OI at CurveGlobal. Why?
I’m on record as saying I like it when graphs start at the bottom left and finish at the top right – I mean – really, who doesn’t? So why is a decline in OI in CurveGlobal products – especially in Short Sterling – a good thing? First, we’ve had participants take off risk into the expiry using our Adaptive Pricing. Trading at a fractional price means market users can close risk and not run any fixing risk into expiry.
The ability to take advantage of tight pricing means that adding or taking off risk into the expiry is best done on CurveGlobal Markets – meaning that we tend to have a higher proportion of front month risk than other contracts. This is, without doubt, good for the users of the market, allowing them to trade in a different way and further reducing risk while trading at a better price and having certainty. This indicates that we will see a more voluminous “saw tooth” in OI on our platform into expiries.
We’ve also seen OI closed down. The cross-margining between futures and swaps is a truly important part of the ecosystem. Closing down or moving positions between clearing brokers – risk that previously offset swaps – is a dynamic that is new to CurveGlobal but good for the market. Best of all, through these changes in OI we’ve seen an increase in liquidity – and, if anything, a boost in the number of fractional blocks. This reinforces the available liquidity to get into and out of positions.
As a result, my expectation is for OI to dramatically increase in H2. Will we break 10% share of OI of the STIR markets that we compete in? We aren’t that far away, and indeed in SONIA we’re around a 36% share of OI (adjusted notional). With a strong customer and product pipeline and the value we offer, I’m super confident that breaking that threshold is just around the corner.
Please check out our one-month SONIA contracts and the market leading depth and pricing on three-month SONIA liquidity. Meantime, Ian’s provided some stats and a trade idea below.
I’m going to dash off later in July for a bit of family time in the Algarve, but whatever you’re doing, I hope you have a great summer.
Thank you for your support in the first six months of this year and here’s to much more to come!
In meliora contende,
CurveGlobal SONIA Futures Expansion
By Ian Murphy
On 29 July 2019, CurveGlobal will expand its SONIA Futures offering with the launch of the CurveGlobal® One month SONIA Futures* and an inter commodity spread (ICS) linking the new one month contract with the existing three month contract, creating a Yield Curve ICS.
Serial contracts for the existing CurveGlobal® Three month SONIA Futures and ICS will also be added during the next quarter so that by Thursday, 17 October 2019 a full list of expiries will be available to trade (see table 1).
The new launches continue the CurveGlobal ethos of providing listed products available to help with the transition to new reference rates away from LIBOR.
Contracts in their accrual phase will follow the “aqua” colour convention (see table 2).
CurveGlobal® One month SONIA Future
- Yield Curve ICS
- Priced CurveGlobal® One month SONIA Futures minus CurveGlobal® Three month SONIA Future
- Full implied in and out pricing
Serial Months added to existing CurveGlobal® Three month SONIA Futures
- Two accrual period serials
- Two standard serials
Serial Month ICS added to existing quarterly ICS listing
- Cross Market ICS
- Priced CurveGlobal® Three month SONIA minus Three month Sterling
- Additional two serial ICS contracts available to trade
*Subject to regulatory approval
Full contract listings
Interest rate maturity comparison
Monthly Volumes and Open Interest
Read the team’s top picks for something to do on a lazy Sunday afternoon...
If you’re looking for a beautiful view of London and some fantastic food, The Mercer Roof Terrace is the place to go. Sitting atop the Vintry & Mercer hotel overlooking the City’s skyline, from St Paul’s Cathedral to The Shard, this new restaurant serves modern British cuisine, showcasing meat and fish from the British Isles, all cooked using a charcoal oven.
Some of the team recently watched Glass – the long-awaited sequel to Unbreakable and a crossover film from Split. Glass received a lot of criticism when it was released but we thoroughly enjoyed it! James McAvoy’s performance as “the Beast” with multiple split personalities is outstanding. The plot follows a psychiatrist who captures and commits David Dunn (Bruce Willis) to a mental asylum alongside his arch enemies in a bid to prove the three are delusional about their supposed superpowers. Watch out for all the twists and turns in this conclusion to the quirky superhero trilogy.
Why We Sleep: Unlocking the Power of Sleep and Dreams by Matthew Walker, explores how cutting down on sleep to get more time for work and leisure may not be such a good idea. Walker addresses how sleep deprivation can have significant long-term physiological and psychological effects on individuals. It is a fascinating read and comes highly recommended by Milain.
Press Articles of Note
(includes subscription content)
LEAVING LIBOR BEHIND
BOE DROPS LIBOR FOR HEDGING UK FOREX RESERVES
MIFID II TIGHTENS WALL STREET’S GRIP ON EUROPEAN TRADING
AHEAD OF THE CURVE: HOW TRADERS PROFITED FROM LIBOR FALLBACKS
BANK OF ENGLAND CALLS ‘LAST ORDERS’ ON LIBOR BENCHMARK
To find out more about CurveGlobal or to offer suggestions on improving this newsletter, contact us at +44 20 7797 1055 or email@example.com.