A new look at €STR Futures

• There is now a three-way battle for market share in €STR STIRs between CME, Eurex and ICE.
• ICE saw a 37% market share in the first three days of trading following the launch of a new liquidity provider programme.
• CME had 88% of the Open Interest in €STR as at the end of October.
• Eurex also offer an incentive program with broad-reaching goals to drive EUR liquidity “onshore”.
• We introduce a Clarus liquidity dashboard from our API to monitor the progress.

In June this year I wrote that “We Need to Talk About €STR Futures“. RFR/€STR Adoption continues to be volatile in Europe, but €STR Futures have had a pretty good year so far, with monthly volumes increasing steadily:

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• Monthly volumes to the end of October 2023 in €STR Short Term Interest Rate futures (STIRs).
• The volumes are shown in millions of USD equivalent.
• From a small start in April, the competition between CME and Eurex has seen volumes increase to over $550bn-equivalent each month.
• For those futures market participants reading this, that is a volume of over 500,000 contracts a month.
• The growth in volumes has been pretty constant throughout the year.
• In September and October 2023, market share was evenly split 50/50 between CME and Eurex.

However, ESTR futures have only managed to grab a tiny percentage of the overall EUR STIR market so far – maybe up to 3% of total volumes. The ICE EURIBOR contract has continued to dominate STIR volumes in Europe:

And then THIS happened:

And then, seemingly out of nowhere, the 1st November heralded a new competitor to CME and EUREX – ICE suddenly started to see volumes trading on its €STR contract:

With just three trading days of data so far, ICE have muscled into first place with a 37% market share. Looking at the ICE Circulars, a “Three Month ESTR Indexed Future Liquidity Provider Programme” started on 1st November:

Obviously this is early days to draw any conclusions. And I am sure that Eurex and CME run similar schemes – for example the STIR Partnership Program from Eurex includes €STR futures as well:

Liquidity Dashboard

It is now really important to have the right data tools to be able to monitor the on-going battle for supremacy in €STR futures. Whether you are an end-user and want to know where to best trade your €STR positions, or a CCP looking to monitor your own market share, you need access to the data. The Clarus API gives you the perfect opportunity to create your own dashboard – or use the one I created this morning for the blog:

Don’t Forget About Open Interest

Intriguingly, whilst CME and Eurex enjoyed a 50/50 market share in September and October, the growth of their Open Interest was very different. 88% of Open Interest in €STR futures was at CME:

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• Split of Open Interest at each of the three exchanges – Eurex, CME and now ICE.
• It is a bit surprising that Open Interest is not higher at Eurex. They offer cross margining versus the Schatz, so Open Interest offsets should be relatively cheap to run.
• I guess the ESTR contracts at CME are offset against the huge SOFR-futures franchise.
• Will ICE have an “incumbents advantage” and see new Open Interest build quickly?
• I imagine most ESTR trades are transacted as a spread to the ICE Euribor contract at the moment?

As we follow the data, it will be interesting to see if volumes can meaningfully increase from here so that EUR Futures can look more like the EUR swap markets, with up to 50% of volumes in €STR:

In Summary

• The three way battle for market share in €STR futures is an interesting one to follow.
• We cannot help but be reminded of SONIA futures. Will we end up with a single dominant exchange this time round?
• ICE has enjoyed a 37% market share in the early days of its new Liquidity Provider Programme but 88% of the Open Interest was at CME. Eurex also has an effective incentive program up and running.
• Clarus CCPView provides the data you need to monitor and analyse €STR liquidity.