We’ve written quite a bit about swaptions clearing in our blog. I was surprised to see that the first article was over 4 years old – back when the industry (and Gensler!) began talking about it:
- July 2013 – Swaptions Clearing – Why Is It Important
- November 2013 – Swaptions Clearing – A More Detailed Look
- March 2016 – Swaptions Clearing at CME
In the most recent article in March 2016, Amir ended up wondering how quickly firms would take up swaption clearing.
Well, we know the answer to that: they didn’t.
But something is perhaps changing. Lets look.
DATA
If we use CCPView, and look at weekly volume back to the launch of swaption clearing (April 2016), we see only a couple trades cleared at launch, and then nothing cleared in 2017.
That is, until last week, when CME cleared over $500m of swaptions across 5 days, as seen in this daily chart from CCPView.
CME also put out some details on their website about the progress:
- 8 Participants have now cleared a swaption
- $558 million cleared in this past week.
- Activity included 30 swaptions (trades) and 5 participants
- Open interest at $280 million
So, how much can we see about these cleared trades on the SDR? This part is a bit unfortunate. I ideally wanted to go see the cleared trades, see if they were straddles, payers, receivers, etc, but…
It seems the SDR data only show 7 cleared trades over the week (as opposed to the 30 quoted by CME). Why doesn’t the SDR show all the cleared swaptions? Likely because either:
- The reporting counterparty executing the swap has not ever had to flag them as cleared (so they are forgetting to flag them correctly)
- Or, perhaps these were executed bilaterally and then backloaded.
If you’re wondering if any cleared swaps were traded on a SEF – no, none of the 7 we see as cleared were on SEF.
SUMMARY
CME reported a good number of swaptions clearing activity last week.
My takeaway is that participants may just be taking this seriously now, particularly given the uncleared margin rules.
A case of clients testing the pipes? Perhaps. We’ll be able to see if this continues.