SEPTEMBER 2019 - CURVEGLOBAL NEWSLETTER
CURVE POINTS | SEPTEMBER 2019
Hi All, 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. 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. Best, ![]() Trade ConceptInter 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
Monthly Volumes and Open Interest![]() Finer Price Tick VideoFor 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 PicksRead the team’s top picks for something to do on a lazy Sunday afternoon... Feeling peckish? Must see Top read Press Articles of Note (includes subscription content)BUY-SIDE FACE OPERATIONAL RISKS IF THEY DON’T PREPARE FOR LIBOR TRANSITION EURIBOR FUTURES SPREAD SPIKE STRANGLES PROP TRADERS SEFS STALL, BUT MORE LIQUIDITY MAY BE COMING NEGATIVE YIELDS: CHARTING THE SURGE IN SLIDING RATES Come Visit us HereFI // FIXED INCOME LEADERS SUMMIT 2019 FIA // EXPO 2019 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. |