- The first CHF SARON swaps have appeared in SDR data.
- This reflects broader uptake of SARON across more trading counterparties.
- We are keeping a close eye on SARON volumes as it is somewhat of a test case for broader Libor reforms.
- Cleared data shows increased Open Interest at LCH, but daily volumes continue to be sparse.
CHF SARON
We wrote about the transition from TOIS to SARON earlier this month. That blog includes a brief history about why TOIS will cease to publish at the end of this year, plus a round-up of what has happened at each of LCH and Eurex so far for outstanding TOIS swaps.
Today’s blog will act as a quick update to that, demonstrating the data that we see across our data products.
SDRView Pro
Real-time access to SDR data is provided via a subscription to SDRView Pro.
We have now seen 11 trades reported by US Persons vs the CHF SARON index:
Showing;
- CHF SARON swaps traded on 3 days – 7th, 8th and 14th November. Remember these are trades involving US Persons. We will check CCPView further down this blog to check on global activity.
- November 14th was the busiest day. It is likely that over CHF200m in notional traded on this day.
- There are clearly some test trades still going through – it is unusual in OIS markets to trade 3y and 5y trades in just CHF5m and CHF7m.
- The longest dated trade was just short of 20 years (maturing September 2036).
- The largest single trade was a four-year maturity, and was capped at the CHF100m limit. We will cross check with CCPView to see if we can infer the total size.
- No trades occurred on-SEF – this is all off-SEF activity.
- All trades were reported as Cleared.
- All of the activity on November 14th was out of the Dec IMM date and running to other IMM dates. Will this be a feature of this fledgling market?
- There has been a lot of cancel & replace activity on this small number of trades. This probably reflects teething problems with counterparties reporting the SARON index for the first time.
- Some of the data still looks suspect – I am pretty sure that all coupons should be negative….
CCPView
A global view of all cleared activity is provided via CCPView. Since we last blogged, we have seen the following activity in CHF OIS:
Showing;
- Activity on 8 days in the past two weeks.
- All new trades have been at LCH. We know these are all versus the SARON index, because LCH no longer accepts TOIS swaps.
- The peak amount of CHF1.5bn cleared on 2nd November remains a recent high. More recently, we have seen CHF216m and CHF156m trade on a single day.
- Generally, activity remains somewhat sparse and erratic.
- There remains CHF335m notional outstanding at Eurex (see chart below). As we explained last time, we believe that CHF220m of this is versus the TOIS index:
Open Interest has continued to increase at LCH. This is good, as people are not just doing test trades in SARON and unwinding them. There must be real purpose behind the trading.
Bad Data?
In an ideal world, we should be able to reconcile the 8 days of activity at LCH with the trades reported on 3 days to the SDR. Particularly as we had one large trade, over CHF100m, reported to the SDR with trade date 14th November.
But guess what?
- SDR volume reported on 14th December was over CHF173m (including a capped notional above the block threshold of CHF100m). All of these swaps were marked as “Cleared”.
- LCH volume reported on 14th December was….CHF10m! Uh-oh.
- It appears that counterparties are having problems reporting their SARON swaps to the SDRs. It is far more likely that some of these SARON swaps were executed on the 13th November (when LCH reported a total of CHF156m cleared).
- It is possible that some of these SARON swaps being reported to the SDRs were uncleared – there is no clearing mandate in place.
- It is important that counterparties trading these new products have the right procedures in place to reconcile their private data with the public data. Remember that Clarus can help with this!
No one wants to see fines related to mis-reporting of swaps, but we have seen some fines from the CFTC for swap reporting errors (Deutsche and Citigroup). Let’s not make SARON a source for more!
In Summary
- Activity in CHF SARON swaps has finally been reported to the US SDRs.
- We see continued activity outside of these swaps as well, as reported by LCH.
- Overall, trading is pretty sporadic. We will keep our eyes peeled for more activity.
- Data quality appears to be suspect for now. Expect this to improve as SARON swaps become market standard.