Mandatory clearing, is it really happening?

Under the Dodd-Frank Act, Clearing for Interest Rate Swaps became mandatory on March 11, 2013 for Swap Dealers (SD), Major Swap Participants (MSP) and Active Funds (AF).

So I decided to look at the DTCC DDR trade repository for evidence of an uptick in Cleared vs UnCleared IRSwaps.

I was very surprised to see no evidence in the trade data for this. The daily trade counts and gross notionals for IRSwaps:FixedFloat do not show any material change between Cleared and UnCleared percentages. For USD the percentage of Cleared swaps remains around 50% of the total, while for EUR it remains around 67%.

What could be the reason for this?

I can think of the following:

1. Firms have already been clearing well before the March 11 date, so there was no sudden rush for firms to start clearing on this date.
2. Firms that have not been clearing and are now required to clear, have simply missed the deadline.
3. There are firms other than SDs, MSPs and AFs, that are responsible for the UnCleared Swaps and the mandatory date for them to clear is later in the year.
4. The product type IRSwap:FixedFloat also captures deals that are not currently clearable at LCH or CME.
5. Two days is too early to draw any statistical conclusions.
6. The trade feeds to DDR, are somehow lagging what is actually happening.

Take your pick.

Or if someone reading this has a better explanation, please comment on this post or email us.

In the meantime, I am going to keep checking our DDR View each day.

Fingers crossed in anticipation.