Lift-off!
Our mission is simple, although sometimes it has felt like we’re fighting the gravitational pull that protects the status quo. The good news is that not only do we have lift-off, but we are fast approaching orbital speed! This became clear at FIA Boca, where we had numerous conversations and positive engagement on how we are driving record volumes, record open interest and material buy-side interest.  

So what’s the answer?

Well, we’ve spent a fair amount of time banging you over the head about the margin offsets we offer at LCH. You know about lower execution costs. And of course, there’s no charge for data at CurveGlobal. All economically important – but seemingly not enough by themselves to fire the after-burners.

Perhaps surprisingly, technology and market structure are the real agents of change. On the technology front, the deployment of the Fidessa smart order router (SOR) is allowing traders to aggregate the market and “split” orders based on best price or in some type of proportion. SORs are not new in equity and FX markets but Fidessa joins TT and Stellar in offering this service to customers in futures. Delivering the economic results without changing the habits of the trader has been huge!

On the market structure side, our dynamic futures block pricing now allows you to trade between the bid and offer at any price that suits you. As a trader, you had two choices to get filled previously: hit the bid or sit passively on the offer and hope you get lifted. At CurveGlobal, we’re pioneering a “third way” that allows the user of the product to trade competitively sized blocks at a price between the bid and offer. This is helping to galvanise hedge funds, such as BlueCrest, props and banks to make and take better pricing – inside the bid-offer.

Finally, thanks to all my friends and colleagues for the messages of support. After a recent bone break, it’s good to be back up and moving again. I asked my doctor if I could tap dance when I’d regained fitness. He said “Yes.'' That's excellent news, as I couldn’t before I broke my leg!

Best,
Andy
aross@curveglobal.com

Trade Concept

CurveGlobal® Three month SONIA

By Ian Murphy

In this month’s Trade Concept, we look at the CurveGlobal® Three month SONIA as we approach the first anniversary of the contract’s launch, on 30 April 2019.

CurveGlobal® Three month SONIA

• Based on the effective overnight reference rate for Sterling (SONIA – Sterling Overnight Index Average) as calculated/published by the Bank of England

• Accrual Period – the contract month’s IMM date to the day before the next IMM date

• Contract Notional £500,000, Fixed Tick Size 0.005, Tick Value £6.25

• Exchange Trading and Clearing Fee of £0.18 per lot

CurveGlobal Inter Commodity Spreads (ICS)

• Priced as CurveGlobal® Three month SONIA vs Three month Sterling

• Exchange created ICS pricing

• Full “implied in” and “implied out” pricing is supported

• ICS enables cross-market trading with no legging risk

• The listed equivalent to FRA/OIS

Volume and Open Interest

• Cumulative Volume traded is now over 781,769, as of 20 March 2019

• Open Interest is currently at 47,968 (20 March 2019)

Strategy Breakdown

• Reviewing the volume from Leg Volume and Strategy Volume

• The ICS generates 50% of strategy activity

Blocks

• Offer greater customer choice on price granularity

• Fractional Pricing is created using Multiple Block Trades

• No fee surcharge for Block Trades

SONIA Swap/SONIA Futures

• Trade – Payer two-year SONIA/Long two-year SONIA strip

• Portfolio Initial Margin requirement: 20.6%

• Potential Initial Margin reduction: 79.4%

Portfolio Margin Reduction Benefits 

• Significant potential to reduce Initial Margin requirements when Listed and OTC positions are combined at LCH
   
• Opportunity to eliminate Initial Margin requirement at competing CCPs
   
• Potentially lower default fund contributions and capital requirements for the Clearing Bank holding their own and client positions

LCH Spider is an automated tool that analyses your listed interest rates portfolio to find trades that are eligible to offset against correlated positions in your OTC interest rates portfolio.

LCH Listed Rates Service
LCH Spider

Examples provided for illustrative non-reliance purposes only, potential benefits indicated are approximate and may not be realised. Data is 20 August 2018.

All initial margin levels for aggregate positions and portfolio positions use LCH Smart.

LSEDM document library

Monthly Volumes and Open Interest

Team Picks

Read the team’s top picks for something to do on a lazy Sunday afternoon...

Feeling peckish?
If you’re into fine dining we’ve got you covered. The ethos of Core by Clare Smyth is to elevate simple ingredients. Milain described his recent experience as “one of the best fine dining restaurants” he’s been to in London. “Nothing felt pretentious or like it was on put on the menu to make to make it sound extravagant. Everything was served for a reason, which made the tasting menu a deliciously cohesive experience.” He opted for the Core Seasons tasting menu, with the “Core-teser” being the standout dish for him.

Must see
A few members of the team have been watching Netflix’s new series After Life and highly recommend it. Ricky Gervais plays a grieving husband trying to punish the world for the loss of his wife – by saying and doing whatever he wants (with no filter!). We found it both poignant and hilariously funny at the same time. See if it’s for you – watch the trailer here.

Top read
John Kennedy Toole won the Pulitzer Prize posthumously for A Confederacy of Dunces, so it really needs no further endorsement. It’s funny, witty and very original, and comes highly recommended by Richard. Find out more here.

Press Articles of Note (subscription content)

BLUECREST BACKS CURVEGLOBAL IN EFFORT TO OPEN UP FUTURES MARKETS
CURVEGLOBAL.COM

ECB ATTACKS EU PLANS FOR BOOSTING SUPERVISION OF CLEARING HOUSES
FT.COM

DIFFERING EUROPEAN APPROACHES MAY HAMPER IBOR TRANSITION
RISK.NET

EU ASSERTS POWER OVER CITY'S EURO CLEARING ROLE
FT.COM

SWAPS DATA: SOFR SWAPS SLIP, FUTURES FLIP
RISK.NET

FRAS WON'T WORK WITH STANDARD LIBOR FALLBACK, EXPERTS SAY
RISK.NET

Come Visit Us

FIA // IDX 2019
FIA IDX
3-5 June 2019 // The Brewery // London, United Kingdom

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