CurveGlobal Markets – A Home of SONIA?

By Andy Ross - CEO, CurveGlobal

CurveGlobal Markets, the futures exchange from London Stock Exchange wants to be a home of SONIA futures, the reformed reference rate for futures. Competing in futures markets is hard, and along the way we’ve all seen many who have attempted and failed. Why is this? 

Well to build a marketplace you need people to come and shop, to try a buy and sell. In futures, like an online marketplace you also need clearing (think delivery capabilities). At CurveGlobal Markets, it’s exciting as we have a plethora of clearing banks and non-bank clearing members, see here, so clearing and netting your positions is as easy as trading. Would it be taking my metaphor too far to suggest that with LCH perhaps we’ve the equivalent of “Prime” delivery? 

LIBOR replacement is a 2021 thing, with the pre cessation trigger announced last week. This means that you, as a risk holder know exactly the spread that will be applied to adjust your LIBOR positions into SONIA positions. Customers can trade CurveGlobal’s Inter commodity spread (ICS) between SONIA and SHORT STERLING at 1/10 of a tick. This means it can and actually is trading at a better price at all points on the short term interest rate Curve. Our members can benefit from best execution on the transfer of their positions at best price. That’s why we’re so excited to have new members joining, trading and clearing. 

And…looking at our wider market we are seeing GROWING volumes.

The fourth quarter of 2020 was our best quarter ever – that is, until the end of February, when we had already surpassed that record, and Q1 2021 is already our best quarter ever.

We have also almost doubled our open interest since 1 October when we went fee free. Last month we saw another tier 1 bank go live, and an additional tier 1 bank start portfolio margining. So just why is CurveGlobal Markets doing so well? The old maxim that liquidity brings more liquidity. Apart from the fact that the distribution to most market participants is up and running?

1. Margin and risk offset
   

   • The ability to put futures and swaps together in the same clearing house is a choice that market participants are making and enjoying

   • 80% of swaps in the market have now moved to SONIA based discounting and clear at LCH

   • If you look at CurveGlobal many of the people who trade swaps that clear at LCH also trade futures on CurveGlobal

   • As well as benefiting from the margin benefits – in future you will minimise convexity/clearing house basis adjustments
      

2. Clarity
   
   • We’ve published very clear market guidance on how we are going to manage and migrate LIBOR positions to SONIA positions
      
3. Fee free
   
   • We offer fee free trading and clearing, so rather than pay for the migration of legacy positions from one contract to the other, if you roll your risk into CurveGlobal Market positions you don’t pay clearing or execution legs
      
4. Best trading tools
   

   • Electronic order book. We offer the ICS pricing – we allow people to trade at 1/10th of a tick. You may think this is technical, but, if you want to switch positions, especially when you know the “adjustment” of LIBOR – this gives you a trading tool to do so in fractional levels

   • Low blocking size – if you want to dip your toe in the water and transfer some of the risk, you can arrange a CurveGlobal block
      

5. Better prices
   
   • Our Inter commodity spread (ICS) between SONIA and SHORT STERLING is trading at a better price at all points on the short term interest rate curve – If you want to achieve best execution do your transfer on Curve

Can CurveGlobal Markets, LSEG’s futures exchange bring meaningful competition to futures markets, with the catalyst of LIBOR reform? Our volumes are growing, our prices are better, so come trade SONIA on CurveGlobal Markets.