BrokerTec Recap – March 2021

  • 29 Mar 2021
  • By CME Group

EU repo, US Treasury activity continues to climb

Supported by the migration to CME Globex, EU repo and US Treasury volumes on BrokerTec surged in February and March amid a steepening of the US yield curve and volatility in equity markets. 

Record activity for EU repo continues into March

  • In March, ADV has grown to €308 billion*
  • Following record monthly ADV of €290.8 billion in February 2021
  • Record daily trading on March 1 of €338.8 billion, 6% above the prior high in March 2020

High volumes across the US Treasury complex

  • Ninth highest day ever for US Treasury volume on February 25
  • Corresponding record activity in 7-year US Treasuries
  • Record trading in 20-year US Treasuries through February following its issuance in May 2020

*Data as of March 22

RV Curve: Yield-based curve spreads, zero leg risk, inside pricing, and more

With BrokerTec's migration to CME Globex setting the stage for innovative technology and trading solutions, BrokerTec launched RV Curve, an efficient way to trade pre-defined, yield-based curve spreads on US Treasury benchmarks.

RV Curve merges liquidity from BrokerTec's central limit order book with a single-threaded matching engine—eliminating legging risk, providing inside liquidity, and increasing matching opportunities when trading benchmark spreads.

More broadly and across EU repo, US repo, and US Treasuries, Globex delivers:

  • Highly robust, low-latency technology infrastructure
  • Deterministic order handling
  • Dynamic order routing
  • Expanded connectivity options
  • More resilient disaster recovery
  • Larger ecosystem of certified vendors and ISVs

Discover same-day benchmarks for secured one-day interest rates in euro, sterling

Each day, CME Group Benchmark Administration (CBA) publishes repo rate benchmarks for the Eurozone and UK based on more than €300 billion daily volumes in the repo market that are executed on BrokerTec and MTS. 

These rates reflect the overall cost of funding achieved by the market, inclusive of both general collateral and suitable specific collateral repo trades. 

RepoFunds Rate Euro is available as a volume-weighted average across Europe, as well as for individual Austrian, Belgian, Dutch, Finnish, French, German, Italian, Portuguese, and Spanish government bond markets.

RepoFunds Rate Euro and RepoFunds Rate Sterling are registered as a benchmark under EU BMR. 

Featured strategy: RV trading US Treasury benchmarks

After several quarters of relative calm, the US Treasury yield curve has become much more active in early 2021. The Federal Open Market Committee continues to hold the very short end of the yield curve near zero, but recently the longer end has recovered from its historic lows, and cash Treasury volatility has returned.

These events have increased the need for efficient hedging across the curve, which BrokerTec’s RV Curve pairs enable at convenient ratios, transparent price levels, and reduced execution risk.

Analysis: The Trillion Dollar Helicopter

The Treasury's ~$1 trillion TGA draw down began in earnest over the last two weeks with $278 billion in cash hitting the market. Read our latest research note exploring how this wall of money could impact short-end rates and repo.

BrokerTec, TransFICC partner to bring liquidity providers to BrokerTec Stream platform

BrokerTec partnered with TransFICC to develop custom APIs that will connect liquidity providers to the BrokerTec Stream platform. 

This partnership will further strengthen liquidity on the Stream platform and allow BrokerTec to focus on building new, innovative functionality to improve workflows in US Treasury markets.  

3-year US Treasury tick cut upcoming in Q2

Short-term Treasury Notes have long been an essential tool for the hedging of interest rate risk. To provide better liquidity and price discovery during a time of constrained volatility and sticky price movements, CME Group will reduce the minimum price increment (MPI) from 1/4 of 1/32nd to 1/8 of 1/32nd. This change is live in the new product release environment for testing and will go live in Q2 2021.