Research Notes

Review and analysis of timely and topical market issues and trends that is published periodically.


DateTitle / DescriptionDocuments
August 24, 2015
SwapsInfo Second Quarter 2015 Review
The ISDA SwapsInfo Quarterly Review provides analysis on interest rate derivatives (IRD) and credit default swap (CDS) index trading activity. The report provides a breakdown of publicly available data to analyze the impact of regulatory change on electronic and bilateral trading volumes, as well as cleared and non-cleared activity. The research shows that clearing and electronic execution continued to play an important role in total trading activity during the second quarter of 2015.
ISDA SwapsInfo Q2 2015 Review FINAL.pdf
July 30, 2015
The Impact of Compression on the Interest Rate Derivatives Market
Compression activity has increased significantly over the past year, driven by new regulations and developments in clearing technology. In particular, the implementation of the Basel III leverage ratio has acted as a major incentive for banks to reduce the size of their legacy derivatives books. Developments in compression services – and especially the unlinking of cleared trades – have helped facilitate increased activity. Total interest rate derivatives notional outstanding has dropped as a result. This report considers how market participants are using compression technology, and the impact this is having on the interest rate derivatives market.
Compression Report July 2015 FINAL.pdf
April 22, 2015
SwapsInfo First Quarter 2015 Review
The ISDA SwapsInfo Quarterly Review provides analysis on interest rate derivatives and credit default swap (CDS) index trading activity. The report provides a breakdown of publicly available data to analyze the impact of regulatory change on electronic and bilateral trading volumes, as well as cleared and non-cleared activity. The research shows that electronic trading volumes continued to play an important role in total trading activity during the first quarter of 2015.
SwapsInfo Q1 2015 Review FINAL.pdf
April 22, 2015
Cross-Border Fragmentation of Global Derivatives: End-Year 2014 Update
Evidence shows that global derivatives markets have fragmented along geographic lines since the introduction of the US swap execution (SEF) regime in October 2013. This development has been particularly conspicuous in the market for euro interest rate swaps.
Market fragmentation FINAL.pdf
March 16, 2015
SwapsInfo 2014 Year in Review
The ISDA SwapsInfo 2014 Year in Review analyzes interest rate derivatives and credit default swap index trading volumes, using notional volume and trade count data from the ISDA SwapsInfo site. The site uses publicly reported data from the DTCC and Bloomberg swap data repositories.
Year in Review Press Release MARCH 16 FINAL.pdf
January 29, 2015
OTC Derivatives Market Analysis: Interest Rate Derivatives
Publicly available derivatives data does not adjust for the countervailing effects of clearing and compression, making it difficult to obtain a clear picture of underlying derivatives market dynamics. This report adjusts for these two forces with respect to the interest rate derivatives market to provide an insight into the size of the market before compression and clearing occur.
OTC Derivatives Market Analysis- Interest Rate Derivatives FINAL.pdf
July 24, 2014
Revisiting Cross-Border Fragmentation of Global OTC Derivatives: Mid-year 2014 Update
Evidence has emerged that over-the-counter derivatives markets have fragmented along geographical lines since the start of the swap execution facility (SEF) regime in the US on October 2, 2013. That trend has been especially notable for euro interest rate swaps, with European dealers opting to trade with other European parties. This development has accelerated since the start of mandatory SEF trading in the US from February 2014, and the market for euro interest rate swaps is now clearly split between US and non-US counterparties. This research note provides evidence of this further fragmentation since February, based on an empirical analysis of cleared derivatives data.
Fragmentation study FINAL.pdf
April 9, 2014
Made-Available-to-Trade(MAT): Evidence of Further Market Fragmentation
On May 16, 2013 the CFTC approved the \\\'made-available-to-trade\\\' (MAT) rule, which gives the market clarity on which products must be, by law, traded on swap execution facilities (SEFs). Once the CFTC issues a MAT determination, a mandate is established for trading that product on SEF, which prevents it from being traded bilaterally by counterparties subject to the SEF requirements. This analysis builds on ISDA\\\'s earlier work on SEFs by focusing on the effects of the MAT regulation and its potential impact on market fragmentation.
MAT Study 20140404_AMENDED_Y_AXIS_LABEL.pdf
February 5, 2014
Interest Rates Derivatives: A Progress Report on Clearing and Compression
How much of the OTC derivatives market is cleared? How much remains to be cleared? What is the composition of the non-cleared segment of the market? Significant changes in the OTC derivatives market in recent years are altering its size and composition. Central clearing, for example, increases notional amounts outstanding, as one bilateral trade becomes two cleared transactions. Compression of both bilateral and cleared trades, on the other hand, reduces notional outstanding. New requirements related to margin for non-cleared trades may drive users of these instruments to cleared products or to other alternatives. Given these dynamics, ISDA conducted an analysis of the interest rate derivatives (IRD) market.
RN IRD Progress 2013-02-05.pdf
January 30, 2014
Adverse Liquidity Effects of the EU Uncovered Sovereign CDS Ban
On November 1, 2012, the provisions of the EU regulation which bans uncovered short-selling of sovereign (single name) CDS came into effect. Market participants who wish to establish a permitted SCDS position must now hold offsetting risk, such as the underlying sovereign bond. This change raised concerns about the impact on portfolio hedging, the potential for a reduction in SCDS liquidity and the implications of a reduction in the ECB’s bond-buying program. In this report, ISDA examines the liquidity impact of the regulation one year after implementation. Findings reveal that EU-regulated SCDS and sovereign indices experienced sharp volume and trade count declines. Additionally, proxy hedges were found to become less effective due to a correlation breakdown with European SCDS.
SCDS Ban Research Note 20140130.pdf