JANUARY 2018 - CURVEGLOBAL NEWSLETTER
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CURVE POINTS | JANUARY 2018  Good morning all, I would like to take this opportunity to wish you all a Happy New Year and offer again my thanks for your support. Normally I don’t spend too much time looking in the rear-view mirror, especially at trading facts rather than lessons learnt, but I thought it was worth quickly mentioning a few 2017 highlights for CurveGlobal. Open Interest
All of this growth achieved into the teeth of the MiFID II implementation. Over the past week, the industry’s ability to implement and manage the changes that have arisen out of MiFID II has been impressive. The implementation was not phased over asset classes, or counterparties but it was rolled out in one “big bang”. LSEDM & CurveGlobal had no issues on 3 January, a testament to the hard work of the team, but also due to the focus and dedication of our customers in preparation and testing. So what about 2018 for CurveGlobal? It looks to be an exciting ride! With the focus shifting from MiFID II implementation, we now have lots on the agenda. You’ve asked us to work on new services, and products such as Libor Replacement, starting with the SONIA future. Approval for portfolio margining on the long-term “bond futures” has been granted by the regulators; and we are focusing on working with LCH towards implementation. Additional futures contracts and our first options are due out later in the year. It’s got all the makings of a game-changing few months. I can’t wait to see the first client reports on MiFID article 27 (best execution) that evidence the pricing and liquidity on offer in CurveGlobal products. Lastly, as you may remember we asked people to vote for and suggested charity events for the team in the New Year. While the voting is still open and my thanks for all the suggestions, one has already been enthusiastically undertaken. Ralph, Ian, Richard, Fiona and I have all entered a diet-off, results to come after Easter! Sincerely,  MiFID II Reactions By: Emily Grimshaw Unless you’ve being living on a remote island, you’re probably aware that the second review of MiFID comprising the Regulation and Directive became effective in EU member states on 3 January 2018. MiFID II aims to create a fairer, more transparent and competitive marketplace with added protection for the investor. The MiFIR regulation contains 55 articles while the MiFID II directive has 97, taken together with many delegated regulations this is not a small piece of EU legislation. It would be impossible to review all of the MiFID implementations but we thought a few spots might be of interest. On the eve of MiFID II, and the following morning an exemption was granted by UK and German Regulators to several major exchanges and clearing houses operating within the EU, meaning that these venues would not be required to comply with open access rules until 3 July 2020. The question to market users is, in whose interest is it to limit competition and open access? Applications to clear CurveGlobal products at other clearing houses haven’t yet been lodged, as we’ve been asked by customers to focus on making the trading landscape more competitive and clear into a global multi-currency pool at LCH. If competing exchanges wanted to come and clear at LCH, and allow their products to be fungible with CurveGlobal products listed on LSEDM, we’d welcome the competition. We believe this could potentially reduce systematic risk and reduce costs and margin for a number of customers. London Stock Exchange Group and LCH have long maintained their open access stance and did not ask for an exemption. Open access is the concept of fair, open competitive markets placing customers at the heart of the business by offering choice of trading venue or clearing house. While it’s difficult to imagine multiple order books with multiple clearing locations, allowing choice provides the optionality for customers to maximise their capital efficiencies. With access to the biggest OTC liquidity pool at LCH, this is in effect what you have with CurveGlobal already. In a world where competition is king, and a major part of the new EU legislation, do clients want to trade as captives to the expensive legacy structure? What is interesting and will drive competition are the new best execution requirements. These cover derivatives and are not just about price, but total cost. Article 27 of MiFID II states that as well as taking “all sufficient steps to obtain the best possible result for their clients” firms have to “establish and implement effective arrangements” for complying with and monitoring best execution. CurveGlobal products listed on LSEDM continue to be best price or tied the majority of the time, while offering lower transaction fees, free market data, potential margin savings and the ability to trade fractional blocks for increased price granularity. We are looking forward to seeing the new best execution requirements drive competition and create transparency for our customers. The full market impact of MiFID II will still take months to become apparent. With the introduction of the Organised Trading Facility (OTF), as well as additional requirements around systematic internalisers, open access, best execution, pre- and post-trade reporting, market making, algorithmic trading, LEI’s, waivers and commodities to name a few, 2018 looks set to be interesting year.  Trade concept: MiFID II implementation has seen LSEDM update the CurveGlobal minimum contract volumes requirements for wholesale order types, Block Trades, Basis Trades, and Exchange of Futures for Swap. The volume requirements are now set at the same volume threshold for all maturities of a contract. This Trade Concept looks at Block Trading using CurveGlobal European Interest Rate Futures, using the updated volume thresholds. The Finer Price Granularity offered by multiple block trades enhances the MiFID II offering from CurveGlobal. Example 1: CurveGlobal 3-Month Sterling Whites Contracts 
Example 2: CurveGlobal 3-Month Euribor® Red Contracts 
Example 3: CurveGlobal Long Gilt 
Example 4: CurveGlobal Bund Calendar Spread 
Block Trading using CurveGlobal European Interest Rate Futures
Clearing CurveGlobal Futures clear at LCH
Examples provided for illustrative non-reliance purposes only, potential benefits indicated are approximate and may not be realised. Monthly volumes and OI 60 seconds with...Richard Walker, Head of Business Development and Marketing
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