Clarus Financial Technology

SOFR Futures and Swaps – Feb 2021

February 2021 was an interesting month in interest rate markets with the volatility in US Treasuries showing up in many products. Today I look at what happened to volumes in derivatives referencing SOFR.

SOFR Futures

In CCPView we collect data for all major interest rate futures, so let’s start by looking at SOFR futures.

SOFR Futures volumes in usd notional (millions)

Next let’s look at the open interest in these Futures.

SOFR Futures Open Interest in usd notional (millions)

Strong signals in both volume and OI that SOFR Futures are on strong upward trajectory.

Let’s turn next to Swaps.

Global Cleared SOFR Swaps

SOFR Swaps volume (usd millions, single-sided)

Let’s now switch to a breakdown of volume by tenor.

SOFR Swaps volume by tenor (usd millions, single-sided)

We see that >2Y was the largest tenor bucket in Feb-21 with $300 billion.

Next open interest (aka outstanding notional) of SOFR Swaps registered at CCPs.

SOFR Swaps open interest (usd millions, single-sided)

SOFR Swaps at US SDRs

In SDRView Res, we have US persons trading activity, in notional, trade counts or dv01 terms for any day, week or month and a dedicated view to monitor RFR Swaps.

US SDR (DTCC) SOFR Swaps gross notional (billions)

Switching from notional to dv01, we see that while volumes have increased in the last four months, in risk transacted terms, we are well below the highs we saw in Oct-20 when the auctions at CCPs due to the change from FedFunds to SOFR discounting took place.

US SDR (DTCC) SOFR Swaps dv01 (millions)

In SDRView Professional, we have live intra-day views to monitor SOFR Swaps and looking at 22-Feb, we see 7Y was the most active tenor with OIS and Basis (Libor vs SOFR) the largest risk traded.

SDRView Professional – SOFR Swaps on 22-Feb

Let’s turn next to SEF trading.

Swap Execution Facilities (SEFs)

In SEFView we can isolate D2C SEFs.

D2C SEFs SOFR OIS and Basis Swap volumes (usd milions)

Turning to D2D SEFs.

D2D SEFs SOFR OIS and Basis Swap volumes (usd milions)

Across both D2C and D2D Venues, in Feb-21 we see $39.5 billion of Basis Swaps and $32 billion of OIS, a total of $83 billion reported (or more precisely identified by us from product descriptions published by SEFs that can leave something to be desired…).

In SDRView, the equivalent On SEF volume aggregates to $44.6 billion of Basis and $37 billion of OIS, a total of $81.8 billion.

As SDR volume cannot be higher than SEF (capped notional rules), there is something in-consistent in the OIS data; either we have failed to identify all the SOFR volume from SEF reports or there is in-consistency in reporting between SEFs and SDRs. A topic that we will dig deeper into and update this blog when we do.

For now what is important is that while SEFView and On SEF from SDR show the above figures for SEF volumes, we see in SDRView much higher volumes for Off SEF; $55 billion for Basis and $120 billion for OIS.

Anyone ready and willing to make a MAT determination for SOFR Swaps?

That’s It

That’s all I have time for today.

Clarus Data Products provide insights into SOFR derivatives, both Futures and Swaps.

Each of CCPViewSDRView and SEFView provide important insights.

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