SEF Trading Overview and Participation

CFTC Technology Advisory Committee

June 3, 2014
Clarus is...

 2 year old Technology Firm

 100% Employee owned

 Focus on developing products to serve Derivative Market 

participants in new world of CCPs, SDRs, Credit Hubs & SEFs. 

SERVICES

RISK TECHNOLOGY

DATA
DATA 101
Data: The basics

What are we looking at

Global Swap Market

Swaps Reported to US Trade 

Registers (SDRs)

Swaps Executed on 

US SEF's
Data: The basics

Two sources of publically disseminated data:

 SDRs (Part 43 “Alpha” trade reporting)

 4 provisionally registered aka “live”

 DTCC

 ICE

 CME

 Bloomberg

 SEFs 

 22 of 24 temporarily registered aka “live”

 16 of 22 have registered activity aka “active”
Data: The basics

Pros and Cons of the Public data

SDR SEF

Trade/Position Trade Level Position Level

Frequency Intraday "Tape" + EOD End-Of-Day

Formats Somewhat common Wildly different across SEFs

Size Transparency Capped Notionals Full Notionals

Venue Only On/Off SEF

Dealer / Client Not Available Not Available (can guess)

Dealer Pay/Rec Not Available Not Available

Packages Not Available (without "tricks") Not Available
DATA – Credit Derivatives (Permitted + Required)
SEF Adoption

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

Millions

CDX.IG - Notional

On-SEF Off % ON

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

CDX.IG - Trades

On-SEF Off % ON
SEF Adoption

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

CDX SEF Adoption - Notional

IG HY iTraxxEur

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

CDX SEF Adoption - Trades

IG HY iTraxxEur
SEF Adoption

So what’s the CDX that remains Off-SEF?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Notional

# Trades

CDX IG - May 2014

On-SEF Block, Off-SEF

Of Remainder, not 5-YR Of Remainder, not OTR/MROTR

Of Remainder, not reported as "Clearing" Unexplained

“Unexplained” might be packages, exemptions, reporting quirks. 

Impossible to tell from public data.
DATA – FX NDF (Permitted)
SEF Adoption

0%

10%

20%

30%

40%

50%

60%

70%

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

FX NDF SEF Adoption - Trades

PEN COP CLP BRL ARS IDR TWD

CNY PHP MYR INR KRW RUB MXN

0%

10%

20%

30%

40%

50%

60%

70%

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

FX NDF SEF Adoption - Notional

PEN COP CLP BRL ARS IDR TWD

CNY PHP MYR INR KRW RUB MXN

 Less than 1% cleared
DATA – IRD Fixed/Float (Permitted + Required)
SEF Adoption

0%

10%

20%

30%

40%

50%

60%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

Millions

USD Fixed/Float - Notional

On-SEF Off % ON

0%

10%

20%

30%

40%

50%

60%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

USD Fixed/Float - Trades

On-SEF Off % ON
SEF Adoption

0%

5%

10%

15%

20%

25%

30%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

Millions

EUR Fixed/Float - Notional (USD Equiv)

On-SEF Off % ON

0%

5%

10%

15%

20%

25%

0

1,000

2,000

3,000

4,000

5,000

6,000

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

EUR Fixed/Float - Trades

On-SEF Off % ON
SEF Adoption

0%

5%

10%

15%

20%

25%

0

50,000

100,000

150,000

200,000

250,000

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

Millions

GBP Fixed/Float - Notional (USD Equiv)

On-SEF Off % ON

0%

5%

10%

15%

20%

25%

30%

0

500

1,000

1,500

2,000

2,500

3,000

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

GBP Fixed/Float - Trades

On-SEF Off % ON
SEF Adoption

0%

10%

20%

30%

40%

50%

60%

0

20,000

40,000

60,000

80,000

100,000

120,000

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

Millions

JPY Fixed/Float - Notional (USD Equiv)

On-SEF Off % ON

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

JPY Fixed/Float - Trades

On-SEF Off % ON
SEF Adoption

0%

10%

20%

30%

40%

50%

60%

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

Fixed/Float Swap SEF Adoption - Notional

USD EUR JPY GBP

0%

10%

20%

30%

40%

50%

60%

Oct-13

21,768

Nov-13

22,430

Dec-13

24,297

Jan-14

26,451

Feb-14

21,038

Mar-14

29,993

Apr-14

23,894

May-14

24,289

Fixed/Float Swap SEF Adoption - Trades

USD EUR JPY GBP
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Notional

# Trades

USD Fixed/Float IR Swaps - May 2014

On-SEF

Un-Cleared

Non-MAT Index

Non-MAT Tenor

Non-MAT Start (Fwds)

Block

Unexplained

SEF Adoption

So what’s the IRD that remains Off-SEF?
SEF Adoption

But it depends how you 

peel the onion.

Most of the Non-MAT 

characteristics are found 

on Fwd Starting (& NonIMM) Swaps

0% 20% 40% 60% 80% 100%

Notion

al

#

Trade

s

USD Fixed/Float IR Swaps - May 2014

On-SEF

Un-Cleared

Non-MAT Index

Non-MAT Tenor

Non-MAT Start (Fwds)

Block

Unexplained

0% 20% 40% 60% 80% 100%

Notion

al

#

Trades

USD Fixed/Float IR Swaps - May 2014

On-SEF

Non-MAT Start (Fwds)

Un-Cleared

Non-MAT Tenor

Non-MAT Index

Block

Unexplained
Buy Side Participation
Characteristic of Off-SEF Trade Oct-2013 May-2014 Change

Non-MAT Start (Fwds) 54.4% 72.8% 18.4%

Non-MAT Tenor 26.4% 30.7% 4.4%

Un-Cleared 22.3% 25.7% 3.4%

Block 10.6% 12.3% 1.7%

Non-MAT Day Count 0.7% 0.8% 0.0%

Non-MAT Index 12.3% 10.0% -2.2%

** A single trade can have multiple of these characteristics

Buyside Participation

Anecdote #1:

 Firms are avoiding SEF’s by trading more Forward Starting (or 

other “close-but-not-quite-MAT”) swaps

Is this backed up by Off-SEF trade data?

Quick answer supports an increase, however:

 Some uptick in % occurs from the decrease in Off-SEF trades.

 We cannot look at only D2C behavior in public SDR data.

73% of Off-SEF 

Trades were 

Fwd-Start

31% of Off-SEF 

Trades were not 

a MAT-able Tenor
Buyside Participation

Anecdote #2:

 Only 10% of the Dealer-to-Client market was trading On-SEF as 

recently as January

What overall trends can we see in the SEF data?
Buyside Participation

 General uptrend in “Client” 

SEFs

 March/April inflated due to 

index rolls

0

100

200

300

400

500

600

700

2013 Oct 2013

Nov

2013

Dec

2014 Jan 2014

Feb

2014

Mar

2014 Apr 2014

May

Billions

SEF Activity - CRD Index - USD Equivalents

BBG ICE MarketAxess TW BGC DW GFI ICAP TP Tradition

0

100

200

300

400

500

600

700

2013 Oct 2013

Nov

2013

Dec

2014 Jan 2014

Feb

2014

Mar

2014 Apr 2014

May

Billions

SEF Activity - CRD Index - USD Equivalents

Legacy "Client" SEF Legacy "Dealer" SEF
Buyside Participation

 General uptrend in “Client” 

SEFs

0

500

1000

1500

2000

2013 Oct 2013

Nov

2013

Dec

2014

Jan

2014

Feb

2014

Mar

2014 Apr 2014

May

Billions

SEF Activity - Vanilla IR Swap - USD 

Equivalents

BBG Javelin TW TrueEX (SEF) BGC DW GFI ICAP IGDL TP Tradition

0

200

400

600

800

1000

1200

1400

1600

1800

2013 Oct 2013

Nov

2013

Dec

2014

Jan

2014

Feb

2014

Mar

2014 Apr 2014

May

Billions

SEF Activity - Vanilla IR Swap - USD 

Equivalents

Legacy "Client" SEF Legacy "Dealer" SEF
Summary

Public SDR & SEF data shows:

 Good adoption across the board for CDX

 FX NDF shows some currency pairs with high On-SEF rates

 Interest Rate Derivatives data indicates:

 Slow uptrend in On-SEF vs Off-SEF

 Vast majority of Off-SEF trades are Fwd Start

 Fwd Start swaps are and have been commonplace in the 

bespoke IR Swap market