OTC Clearing: What’s Next For 2019?

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2018 At A Glance

  • Over 500 global clients cleared interest rate swaps at CME in 2018, with volume growing 17% year-over-year to $105B avg. daily notional
  • Volumes in emerging markets products grew by 32% to $30B per day
  • Chilean and Colombian Peso swaps launched May 21 and was our most successful launch ever, ADV reached $2.6B in Q4 with 65 clients clearing
  • SOFR swaps launched October 1, available out to 30 years with SOFR discounting and price alignment
  • NDF clearing took off in October with clearing across 10 pairs

Coming up in 2019

  • Increasing the opportunities to voluntarily clear OTC products, helping our global client base prepare for Uncleared Margin Rules
  • Expanding portfolio margining to include listed options, significantly growing the pool for potential risk offsets
  • Launching Israeli Shekel swaps as our market-leading 25th IRS currency*
  • Enhancing CME’s coupon blending solution, configurable fixed rate blending, to enable greater notional reduction
  • Scaling out FX clearing after the successful first buy side Cash-Settled Forward cleared in January 2019

*Subject to regulatory approval

Listen

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 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 | Read More

  • 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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