Product Overview

Chris Barnes July 2020

Rates OTC Derivatives Markets and COVID-19
Strictly Confidential

Market Volumes – Global Records in Clearing

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IRS, Basis, OIS, FRA Notional ($Ms)

Global Cleared Data (CCPView)

USD EUR GBP AUD JPY CAD

• March 2020 marked a new all time 

record for cleared volumes at CCPs 

across all Rates OTC derivative products.

• Even for Rates markets, this was a 

uniquely global shock.

• It wasn’t a record month for USD 

volumes alone.

• It wasn’t a record month for EUR, JPY, 

GBP nor AUD either.

• The Clearing infrastructure was able to 

scale-up impressively in these major 

currencies.

• Market participants continued to choose 

clearing. 96% of Fixed-Float swaps were 

cleared in March 2020.

Research: Swap Market Record Volumes in response to COVID
Strictly Confidential

Market Volumes – All Other Currencies

• Record cleared volumes.

• Reinforces the nature of the global 

shock.

• Incredible growth in these currencies in 

such a short period of time.

• Market continues to choose Clearing 

even without clearing mandates.

Research: Swap Market Record Volumes in response to COVID
Strictly Confidential

Market Volumes – Risk Traded

• Transaction level SDR data gives us the 

opportunity to translate notional 

amounts into risk amounts.

• The volumes in March 2020 were not

solely a result of lots of short-dated, 

large notional trades.

• The amount of risk passing through the 

market was a new record.

• A record month in USD IRS DV01 

reported to SDRs.

• Market structure was able to scale up 

and process 90%+ more risk than a 

typical month.

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Fixed-Float IRS DV01 ($Ms)

SDR Data

USD EUR GBP AUD JPY CAD

Research: US Treasury Market Volumes during COVID
Strictly Confidential

Market Volumes – Transparency Worked

• US SDR’s provide the only transaction 

level data for Rates trading. Other 

jurisdictions are severely lacking in 

timely, accessible post-trade 

transparency data.

• There was no move towards transacting 

“away” from SDR reporting, despite 

most dealers having multiple entities 

across jurisdictions.

• Consistently 45% of the global USD IRS 

market was reported to SDRs in March.

• Transparency was a benefit to market 

participants:

• Proved that markets were not 

“seizing up”.

• Removed rumours from the 

market.

• Price and volume information key 

to removing information 

asymmetry. 0%

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SDR Dark %

Research: Is Transparency Helping Market Function
Strictly Confidential

Market Volumes – SEFs Worked Extremely Well

• Chart 1: Record percentage of USD IRS 

transacted on-SEF in March 2020.

• Chart 1: This has continued now we are 

in more normal market conditions. 

Market participants clearly had a good 

“SEF experience” during the crisis.

• Chart 2: Which market participants 

chose SEFs during the crisis?

• Chart 2: Answer – D2C. The combination 

of Bloomberg and Tradeweb market 

share was at its highs during March at 

around 75% of total SEF volumes (all 

currencies, fixed-float IRS).

• Chart 3: Record volumes in USD IRS were 

transacted on-SEF. The D2C SEFs were 

particularly successful.

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Fixed-Float USD IRS Transacted On or Off SEF (Notional)

ON SEF OFF SEF

Chart 1 

Chart 2 Chart 3 

Research: Record Trading Volumes in March
Strictly Confidential

What Worked Well for the D2C SEFs?

• Answer: Block Trading 

• Transparency requirements from SEFs 

mean we know the exact size (above the 

SDR reporting thresholds AMBS) of Block 

Trades transacted on-SEF.

• Only BBG and TW transact Blocks as 

RFQs.

• Block trade volumes hit a record during 

March 2020.

• 43% of the D2C USD IRS volume was 

transacted as a block – a Q1 2020 high.

• Block trading percentage hit a recent 

high in May – again, suggesting D2C 

market participants have had a “good 

crisis” with the existing block regime.

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Block Trading of USD Fixed Float IRS on D2C SEFs

Block Non-Block % Blocks

Research: CFTC Block Trading Consultation May 2020
Strictly Confidential

What Happened to Pricing?

• Execution conditions changed during 

March 2020 compared to other trading 

days this year.

• The benefits of post-trade transparency 

mean that the change in market 

conditions can be quantified . It is not 

based on anecdotal evidence.

• Notable how quickly pricing conditions 

returned to pre-March levels.

• Methodology details available on the 

Clarus blog.

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USSW10 Volume Weighted Price Dispersion

Research: USD Swap Markets During COVID-19 Pandemic
Strictly Confidential

What Happened in Uncleared Markets?

• Still trying to answer this question.

• USD Funding access was at the centre of 

the crisis responses with large uptake of 

central bank FX swaps.

• But there was no spike in volumes in the 

two largest uncleared Rates markets –

Cross Currency and Swaptions.

• Transparency is limited in these markets.

• Did the markets “go dark” to avoid 

SDR reporting?

• Did markets fail to scale in the 

same manner as Cleared markets?

• Did market participants avoid 

taking on more bilateral 

counterparty credit risk?

• Did the Uncleared Margin Rules 

limit trading in any manner 

(collateral requirements, 

operational complexities?).

Cross Currency Swaps 

Swaptions 

Research: Clearing House Margin Calls Q1 2020
Strictly Confidential

clarusft.com/blog 

Research