Hi All,

I sat down to pen this note with a backdrop of the junior Ross cost-centres about to return to school. I mean, how many pairs of shoes can a child need – and grow out of – in such a short period of time? It’s funny to think of September as the start of our new year, but here at CurveGlobal it marks our third birthday. It is indeed a new year. 

Let’s ponder this for a minute – we’re in our fourth year. Wow! Market structure changes move at a glacial pace but even so, we’ve onboarded a significant number of trading parties across sell-side and buy-side institutions, and new clearing members. Growing OI. Growing volumes. Best prices and more use of smart order routers. I’m not saying it’s been easy – far from it – but the MiFID II headwind is now a tailwind of best execution and price transparency. 

So how are we celebrating our birthday? We want to give you all a present (probably not what you have grown to expect from a futures platform!). By now it should be clear that competition is good for market structure, product innovation and lower costs. So our plan is to take it one step further and CurveGlobal Markets will be offering you the option of an “all you can eat” trading fee.

With one fixed fee, you can know how much it will cost to execute for the whole year. It really is that simple and transparent. That’s why it is such a fundamental change in futures market structure! Remember, if you prefer to “pay as you play”, we still have significantly lower all-in fees than competitors, so take your choice. Find out more details and how to apply here.

Separately, OpenGamma will soon start to publish the margin efficiencies of clearing futures at LCH. It’s another way we can help open up and simplify the marketplace.

Lastly, it’s fine me writing about margin efficiencies or customer-focused fee models but the liquidity and on-screen price has to be there – this is the biggest cost. The good news is that a growing number of you are seeing this as a benefit. On screen we’ve moved to 1/10 of a tick on the SONIA-LIBOR ICS, so that if it makes sense you can trade at a better fractional price. See Ian’s piece below for more details. 

Off-screen, we continue to have a series of blocks on both spreads and outrights trading inside the on-screen price. So, what does it all mean? Potentially lower margin, lower (and now capped) fees, all being executed at better prices.

With the increased focus on ensuring that firms are fulfilling their best execution obligations, is it any wonder that at least a third of my meetings are with compliance officers these days? 

Best,
Andy
aross@curveglobal.com

Trade Concept

Inter Commodity Spread – Finer Price Tick

By Ian Murphy

CurveGlobal® Three month SONIA Futures

On 30 April 2018, CurveGlobal introduced the first three month futures contract launched by an exchange that referenced the reformed SONIA rate of the Bank of England. 

At the same time we listed the Cross Product Inter Commodity Spread (CP-ICS), which linked pricing with our existing Three month Sterling Future based on LIBOR.

CP-ICS is priced: CurveGlobal® Three month SONIA minus Three month Sterling.

The CP-ICS is the listed version of the OTC LIBOR/OIS spread.

The CP-ICS benefits from full implied pricing of both in and out orders, which benefits the two individual contract order books and the order book of the ICS.

The CP-ICS has generated 35% of our SONIA futures volume in 2019 and highlights the importance of this trading strategy.

Both individual contracts have notional values at £500,000 per lot, with minimum tick size and value of 0.005 and £6.25 respectively.

Watch this video to see how the CP-ICS works. 

CurveGlobal® One month SONIA Futures

We followed this up in July 2019, with the launch of the One month SONIA contract at a notional of £1,500,000 per lot, with minimum tick increments 0.005 and value £6.25. The date cycle is monthly third Wednesday (IMM monthly style) and follows the accrual convention of the three month contract.

The complementary characteristics of the new one month contract allowed us to launch a new ICS, the Yield Curve Inter Commodity Spread (YC-ICS), which reflects pricing of one month and three month time horizons.

YC-ICS is priced: CurveGlobal® One month SONIA minus CurveGlobal® Three month SONIA.

Inter Commodity Spread – Finer Price Tick

The pricing for both inter commodity spreads was further enhanced by reducing the tick size to 0.001 (1/10 tick) and the corresponding minimum value to £1.25 to create the Finer Price Tick.

An order in an ICS, at 1/10 tick, does imply into the order books of the underlying contracts.

This pricing enhancement has seen market participants utilise the new 1/10 tick pricing for 51% of the CP-ICS since the change.

The Finer Price Tick and the improved implied pricing is shown in this video. 

CurveGlobal benefits

• Competitive fee structure, no surcharges for block or basis trades and no charge for market data
• Contracts designed with aligned date cycles
• One month and three month SONIA-based futures contracts allowed creation of YC-ICS
• Three month based SONIA- and LIBOR-based futures contracts enabled creation of CP-ICS
• Our SONIA-based futures and ICS offer market participants enhanced products to assist their LIBOR transformation to SONIA-based rates
• Introduction of Finer Price Tick for the ICS (0.001) has enhanced price discovery for participants
• Best execution, independent price analysis by big xyt shows the CurveGlobal CP-ICS is exclusively best price 90.7% of the time across the 6-year strip. 

CurveGlobal Markets Document Library

Monthly Volumes and Open Interest

Finer Price Tick Video

For more information on how the finer Price tick in the ICS works, click the image below or here to view it on our website.

Team Picks

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

Feeling peckish?
If you’re in the mood for simple yet exquisite food, BRAT needs to be on your radar. Awarded a Michelin Star earlier this year, BRAT features European cuisine that is cooked on an open wood-fired grill, with the house speciality of turbot served on the bone. The wine list is just as good as the food, and the staff are incredibly helpful when making your wine selections.

Must see
Some of the team have recently watched the BBC and Amazon series Fleabag and thoroughly enjoyed it. It follows the story of a single woman making her way through life, doing it for herself – and finding her own life not only hysterical but also dark, troubled and slightly twisted. The series manages to encapsulate all the harsher sides of life with both dry humour and honest pain. Sherrie described the series as “not for the faint hearted...to be enjoyed with a glass of wine and an open mind”.

Top read
Domino Island was published this year after the discovery of an early manuscript drafted 50 years ago by classic thriller author Desmond Bagley. The plot follows an ex-serviceman working in London as an insurance investigator, who is sent to the Caribbean to determine the legitimacy of an expensive life insurance claim. With themes of corruption and murder, it is an enthralling read and comes highly recommended by Andy.

Press Articles of Note (includes subscription content)

BUY-SIDE FACE OPERATIONAL RISKS IF THEY DON’T PREPARE FOR LIBOR TRANSITION
THETRADE.COM

EURIBOR FUTURES SPREAD SPIKE STRANGLES PROP TRADERS
RISK.NET

SEFS STALL, BUT MORE LIQUIDITY MAY BE COMING
RISK.NET

NEGATIVE YIELDS: CHARTING THE SURGE IN SLIDING RATES
FT.COM

Come Visit us Here

FI // FIXED INCOME LEADERS SUMMIT 2019
FIXED INCOME LEADERS SUMMIT
7-9 October 2019 // Plaça de Willy Brandt // Barcelona, Spain

FIA // EXPO 2019
FIA EXPO
29-31 October 2019 // Hilton Chicago // Chicago, IL, USA

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.