We’re living in exciting times. At the beginning of the week we listened to the market and reduced the tick increment to ½ ticks in our current Short Sterling products. Next week with the launch of our new SONIA contract we have a genuine first!
What’s more, we’re launching this with an “inter commodity spread (ICS)”, which means that folks can trade a spread (between Short Sterling and SONIA) with no legging risk, as the market implies fully executable prices. With ½ ticks, new SONIA contracts and a lower risk to trade via an ICS contract, we’re proud to be leading the way towards a more efficient introduction of the new sterling benchmark!
In the few days since we have reduced our minimum tick size, we are already seeing multiple examples in a wide variety of expiries, where the CurveGlobal price is the best price in the market. The two screenshots below were snapped at 1:57pm and 1:58pm on 25th April. Here you can see where CurveGlobal was best bid or offer, whether a competitive exchange had the best price, or whether there was a tie – but check this for yourself!
It’s interesting to me that firms are leaving money on the table for themselves or their clients by trading on a worse price in other markets than that available through CurveGlobal. I’m excited to see how the new reporting rules and data on Best Execution drive interest in CurveGlobal products.
Figure 1 – CurveGlobal c/w rest of market 1:57pm 25th April 2018
Figure 2 – CurveGlobal c/w rest of market 1:58pm 25th April 2018
As always, by providing access to a new source of transparent pricing, we’re introducing true competition into the futures markets with the aim of driving better execution for all participants. We'll continue to work tirelessly for you.
Initiatives like this are, of course, worthy in themselves, but they only really matter if they make a difference to you, the marketplace, and there is a critical mass of activity.
Fortunately, we’ve got some good news to share… Here are some 2018 CurveGlobal highlights:
- Highest CurveGlobal as a % of legacy exchange volume in Short Sterling of 2.81% achieved on 26th March
- Highest CurveGlobal as a % of legacy exchange OI in Euribor® of 2.19% achieved on 23rd March
- Highest CurveGlobal as a % of legacy exchange OI in Short Sterling of 2.94% achieved on 5th March
- Highest trading day volume 23,430 achieved on 26th March
As part of our commitment to change the market, at the beginning of April, we launched our Jump Ball programme, which allows those who trade to own part of the infrastructure. One of the great benefits is that you don't need to be signed up from day one but can join at any point. Uptake has already been strong – read on to find out how to get involved.
Overall, OI is up nearly 15% this year, and over 175% from the same time last year – and this is before we implement a ½ point tick size for our new SONIA futures contract.
On a more weighty subject, I reluctantly announce Ralph as the winner of our ‘biggest loser’ contest. It was a fun and healthy diversion from work and raised more than £1,000 for charity. Congratulations Ralph!
Jump Ball Customer Partnership Programme
On 3rd April 2018, CurveGlobal launched its Jump Ball programme, which awards up to a total of 10% of CurveGlobal’s equity capital to opted-in qualifying participants, allocated in quarterly assessment periods over the next six calendar quarters.
The top five participants, by traded volume, in each calendar quarter will qualify for a pro-rata equity award. A single participant who trades the most overall volume throughout the programme will qualify for an additional, individual award. Awards are calculated and notified at the end of each quarter, with the equity itself issued in a single transaction at the end of the programme in Q4 2019.
The scheme is available to all Members of LSEDM for CurveGlobal products and their clients. Participants can opt-in at any point during the programme by signing the CurveGlobal Jump Ball Opt-In Agreement.
The Jump Ball programme reinforces CurveGlobal’s approach to partnering with market participants to create real and compelling competition in the Interest Rate Derivatives space, rewarding firms who take an early adopter leading role in realising this strategy.
The programme is already generating a great deal of interest amongst market participants, with several already signed up within two weeks of the launch.
If you wish to participate in the Jump Ball programme or would like further information, please contact the LSEDM Product Team at LSEDerivativesProduct@lseg.com.
Trade Concept – Choice and Opportunity:
the Inter Commodity Spread (ICS)
By: Ian Murphy
This month we review the Inter Commodity Spread (ICS)
- The ICS is priced CurveGlobal® Three month SONIA Future minus Three month Sterling – Example:
- SONIA JUN2018 is 99.28
- Sterling JUN2018 is 99.10
- ICS is 0.18
- The ICS will be available for all six years, pricing the difference between all 24 quarterly contracts quoted for Three month Sterling
- The ICS is an exchange supported spread with no legging risk
- The ICS will be supported by full “implied in” and “implied out” pricing
- The ICS contract allows participants to trade against orders that can be implied from combinations of orders resting in outright markets and/or orders resting in the strategy markets
- All ICS spread executions are filled with contracts in the underlying
- The ICS is the listed derivatives version of the OTC SONIA/Libor spread and will provide an additional trading tool and hedging tool
- The new SONIA contract and ICS supports the regulatory momentum behind Libor replacement and migration to OIS-based contracts
Margin requirements for the new CurveGlobal® Three month SONIA Future and the ICS
- The CurveGlobal® Three month SONIA Futures will join Three month Sterling Futures and will be margined within the Listed Rates Service at LCH
- The table below presents the stand alone, one lot initial margin requirements, columns 3 and 4
- The initial margin requirement for the ICS spread trades is shown in column 5
- The lower chart highlights the potential initial margin savings along the maturity strip for ICS trades
*The CurveGlobal® Three month SONIA Future in accrual will have colour naming convention of “aqua”, then contracts follow market convention white, red, green, blue, golds and purple
**Indicative initial margin levels in GBP, as of 02/03/2018 (including Reg.buffer)
Margin savings at each expiry
- The tick size reduction for Three month Sterling, 7:30am 23rd April
- Launch of CurveGlobal® Three month SONIA, 7:30am 30th April
- Launch of the Inter Commodity Spread (ICS), 7:30am 30th April
- The CurveGlobal® Three month SONIA Futures, free of fees to 31st Dec 2018
Examples provided for illustrative non-reliance purposes only, potential benefits indicated are approximate and may not be realised.
Team Spotlight 60 Seconds with...
Chris Bennett, Business Development at CurveGlobal
1. What are you listening to/reading these days?
I’m reading a book called Resilience by ex-US Navy SEAL, Eric Greitens. It was given to me by the founder of a hedge fund when I was in New Jersey recently. One of the stand-out quotes for me is, “The essence of responsibility is the acceptance of the consequences – good and bad – of your actions. You are not responsible for everything that happens to you. You ARE responsible for how you deal with happens to you.”
I’m not precious about music. If it has a good melody and meaningful lyrics then I enjoy listening to it. I’ve discovered as I get older I’m more interested in the lyrics than I was as a youngster and I find the deepest/happiest/saddest words in some of the – at first hearing – cheesiest songs.
Whilst I do still like the old stuff I am admittedly a pop junkie and some current favourites are Rita Ora, Ed Sheeran, James Arthur and any classic house music. Favourite song of all time – Oliver’s Army by Elvis Costello.
2. What is the one thing you can’t live without?
3. If you could invite any four dinner guests past or present who would you choose?
Margaret Thatcher, Sid Vicious, Marilyn Monroe and Leonardo da Vinci.
4. You can do any job for just one day, what would it be?
That’s a difficult one. I’d like to say Andy Ross’s job, just so that I could revel in the greatness briefly! Seriously, though, I’d like to work in a refugee camp in one of the many distressed areas of the world. I think it would be humbling to see how those less fortunate in life than me cope with such hardship.
5. Ten years ago, where did you think you would be now?
Retired on my own personal island in the Caribbean.
LIFE AFTER LIBOR: BOE TAKES ON SONIA BENCHMARK OVERSIGHT
LIFE AFTER LIBOR, A CUT-OUT-AND-KEEP GUIDE
LIBOR ADMINISTRATOR PREPARES TO CUT NUMBER OF RATES
SWAPS BASIS LEAPS AS LDI FUNDS PREP FOR LIBOR’S DEATH
AFTER LIBOR: JAPAN, AUSTRALIA LOOK TO MULTI-RATE FUTURE