- October 2024 saw new block sizes implemented in the US which are 64% larger.
- This results in more notional being reported.
- We estimate that SDR data covers up to 80% of global USD swap markets.
The new block sizes in SDR data make trends in the data more difficult to identify – because now only 25% of notional should be “dark” (i.e. above the capped thresholds), down from 50%. More transparency is good, but we need to be careful when looking at data from before and after the new block thresholds were implemented.
The briefest possible summary of the changes comes from my previous blog, stating;
- USD block sizes are now 64% larger in DV01 terms.
- EUR are 29% larger.
- GBP are 23% smaller.
- JPY are 47% smaller.
With a couple months worth of data now, I’ll have a look at some of the changes.
Number of Block Trades
First up, a really nice chart showing the impact of regulatory changes!
Showing;
- The number of capped trades reported to SDRs has really reduced. I already noted this in the previous blog.
- Does the reduction make sense though? There are now 64% fewer capped trades reported.
- That is consistent with the larger USD cap sizes, and USD is the biggest market, particularly for trades reported to US SDRs.
- So it’s a nice looking chart, but I’m not sure it tells us much.
Notional Amounts
A health warning should be attached to the following chart. Look at the notional amounts reported each month:
So October was a record month, right? WRONG! If this blog saves just one intern (or senior manager!) from making that mistake, it will be worth the 700 words. The calibration of the block thresholds means that 25% of total notional should now be above the capped thresholds, where-as previously it was 50%. Therefore if we scale up the pre-October amounts by 100%, and the post-October amounts by 33% we get a more accurate picture of total volumes:
September and January were most likely the largest notional months in 2024 (and by extension, the largest months we have seen reported to SDRs). November volumes were really nothing to write home about.
Nasty Data
Here’s a lesson kids – not all data can be displayed nicely in a chart! When trying to make sense of the new thresholds, I thought it would be good to look at the proportion of trades in each currency that is reported as a capped trade. Here’s a cut-out and keep data table:
| USD | GBP | JPY | EUR | |
| % of Capped Trades before October | 8% | 5% | 5% | 16% |
| % of Capped Trades since October | 2% | 4% | 6% | 5% |
Showing;
- In USD, 8% of trades used to be reported above the capped threshold.
- This has now dropped to just 2% of trades.
- This is a 71% reduction in the proportion of trades (keep up there at the back).
- This is consistent with the 64% increase in DV01 size for trades to qualify for capped treatment.
- Hurrah – the data makes sense!
Unfortunately, the data only passes this sniff test for USD. The other currencies really don’t tie in with the increases (and decreases) that we have seen in block sizes. Weird.
The Joys of Data
None of this is to say that the new block sizes are calibrated “incorrectly”, or even that the old block sizes were the right ones!
We are dealing with data across multiple dimensions:
- The changes in DV01 were averages across all maturities.
- The changes per maturity vary significantly.
- Trading activity changes from month on month.
I won’t bore you with the details, but even a “model” based on volume weighted trade counts per maturity is awful at making sense of how many capped trades we expect to see as a result of the new thresholds.
CCPView
What is good (for us at Clarus at least!), is that these changes only impact SDR data. And that is not the only source of data that we have. We also have CCPView.
This gives us an opportunity to benchmark just how much of the USD Swaps market is reported to SDRs. Assuming that CCPView represents 100% of the total USD OIS market:
It looks like 80% of the global cleared USD swaps market was reported to SDRs in November 2024. Pretty impressive transparency.
In Summary
- The new calibration of block thresholds results in more notional being reported, with fewer trades reported above the new cap thresholds.
- This is important when trying to interpret the data.
- CCPView is the best benchmark, providing insight into total volumes in the global market.
- We estimate that 80% of the USD swaps market was reported to SDRs in November.