OTC Clearing: What’s Next For 2019?

CME Group’s leading economist Erik Norland gives his thoughts on what 2019 will mean for the OTC market.

LatAm Swap Clearing Continued to See Strong Growth | Read More

• The launch of Chilean Peso and Colombian Peso non-deliverable IRS in May met with strong uptake
  • $345B cleared since launch, supported by 11 FCMs and 21 liquidity-providing dealers
  • Participants actively backloaded both, interdealer and client exposures, to clearing
• BRL volume exceeded $20B on 33 days compared with 11 in 2017,

• Focused on developing CME’s Latin American offering
  • 34 participants based in LatAm
  • Increased the limit of Mbonos and Cetes to $250M USDE per FCM for initial margin, and can now be applied to requirements across all products at CME Group
  • Now supporting MXN IRS out to 31 years to fully cover the traded curve

SOFR Trading Began at CME | Read More

• SOFR futures launched May 7, followed by SOFR swap clearing on October 1, partnered with the Alternative Reference Rate Committee (ARRC)
• Following customer demand, CME’s SOFR swaps are discounted using SOFR.  Tenors out to 30 years are supported for OIS and basis swaps versus both Fed Funds and ICE LIBOR
• 95 participants in SOFR futures traded over $1.3T notional*, and $35M DV01

• Packs and Bundles for SOFR futures will launch in Q1 2019, pending regulatory review

16 institutions have issued a total of $26.1B notional in floating rate instruments tied to SOFR

*Notional shown for illustrative purposes only, computed based on the value of an equivalent money market instrument with the same dollar-value-of-basis-point (DV01)

NDF Clearing Took Off | Read More

• Consistent NDF volume cleared at CME beginning in October, comprised both new risk and volume related to margin optimization
• Collaboration with optimization vendors - CME is the most capital efficient means of clearing NDF along with FX futures exposures
• CME included as node in Quantile cycles potentially delivering margin savings of 50% versus SIMM
• Launched FX Blending in February, the first CCP to offer this service

Expanding use of Compression | Read More

• Over $50 trillion and 1 million trades compressed to date across multilateral compression and coupon blending
• 14 multilateral cycles across USD, MXN, BRL and EUR in 2018
• 6 non-members actively participated in blending and multilateral cycles
• Enhanced configurable fixed rate blending solution delivered, bringing greater compression efficiency
• Delivering Trade Revision in partnership with triReduce in H1-2019 increase cycle efficiency

Evolving our Industry-Leading Portfolio Margining Solution | Read More

• Used by over 700 unique accounts, created on average $2.4B in margin efficiencies - based on correlations across CME’s OTC cleared and futures franchises (24 IRS currencies, swaptions, 6 CBOT Treasury futures, Eurodollar futures, MAC Swap futures and Fed Fund futures)
• Particularly effective with Invoice Spreads, which have seen 77% increase at CME since 2015
  
• In 2019 we will be expanding our portfolio margining to include Eurodollar options

Recognized CCP in multiple jurisdictions, open 24/5 

• Our regulatory standing in multiple jurisdictions enables you to fulfil your local clearing obligations with CME in multiple locations including: the U.S., Europe, Canada (Quebec, Ontario and Alberta), Mexico, Australia, Singapore, Hong Kong and Japan.

Source: CME Group Data

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