DERIVATIVES

Cleared US$ IRSs jumps 100% since January

The number of US dollar-denominated interest rate swaps being cleared has increased by nearly 100% since January, according to recent data.

By Paloma Migone paloma.migone@information-partners.com June 21, 2013 10:28 AM GMT

The number of US dollar-denominated interest rate swaps (IRSs) being cleared has increased by nearly 100% since January, according to recent data.

Clarus, a new financial technology provider, has recently launched SDR View, a tool using reporting information from the Depository Trust and Clearing Corporation (DTCC).

The programme shows there was an average of US$110.5 billion worth of standardised USD IRSs traded in the four weeks to 28 January. In the four weeks to 10 June, this figure climbed 97% to an average of US$217.5 billion.

Uncleared volumes, on the other hand, have fallen 62%, from an average of US$86.4 billion to US$33 billion during the same period.

However, Amir Khwaja, CEO of Clarus, said the numbers are understated as block trade rules allow for capped notionals.

He said the rising trend of cleared IRSs was clear however, showing industry participants were complying with new clearing requirements.

"Looking at daily numbers is too noisy in the swaps market. You have busy market days and very quiet market days. That noise is not useful to us when we are looking at trends," Khwaja said.

"The weekly averages hides some of that noise and the main thing you can see there is an increase in cleared volumes and a decrease in uncleared volumes, which has been the goal of regulators."

Under the US' Dodd-Frank Act, standardised swaps must be centrally cleared and reported to a swap data repository (SDR). The reported data is available for monitoring by regulators as part of efforts to reduce systemic risk and increase oversight.

Clearing for the largest users of index credit default swaps and IRSs came into force in March, while most buy-side firms were required to clear from 10 June.

The day after the latest US deadline, SDR View shows about US$54.4 billion of US$ IRSs trades were cleared, up 36.7% from US$39.8 billion on 10 June. The number has since fluctuated, however.

Rules under the European markets infrastructure regulation, which also require the clearing and reporting of swaps, have been subject to several delays, but are expected to be implemented early next year.

DTCC launched its interest rate derivatives trade repository last December, with 15 of the largest global dealers now submitting data.

Alongside DTCC, there are two other SDRs in the US IntercontinentalExchange and CME Group. Clarus has plans to upgrade its service to include data from both as well as data from trade repositories in the future.