Credit default swaps (CDS) traded on swap execution facilities (SEFs) grew 75% from January to April, according to data compiled by the International Swaps and Derivatives Association (ISDA), while rate swaps have seen little growth.
In March, 8,198 CDS trades were executed on SEFs, up 74.1% from January’s total of 5,112 trades. The highest daily trading value was on 13 March, with 566 trades worth US$17.8 executed on SEFs. The data includes all US dollar CDS product types executed on SEFs across all tenors.
As part of efforts to increase transparency into the formerly opaque OTC derivatives market, ISDA has made available for public viewing data from the Depositary Trust and Clearing Corporation, which operates a swaps data repository.
The data has shown the industry’s gradual reaction to SEFs and mandatory trading requirements. The first ‘made available to trade’ (MAT) requirements – de facto mandatory trading rules under the Commodity Futures Trading Commission (CFTC) – came into force for CDS products on 26 February.
The data shows a gradual climb in trade volume prior to this date and the one-day monthly high for February occurred two days after this date, when 388 CDS trades executed on SEFs with US$11.4 billion in notional. February’s trade total reached 4,825 CDS transactions.
However, the number of interest rate swaps (IRS) executed on SEFs has not grown over this period, according to the data. In March, 20,312 IRS trades executed on SEFs down slightly from January’s 20,635 trades. This data included all IRS product types executed on SEFs across all tenors.
The first MAT requirement for IRS products occurred on 18 February, although the first trading day for US participants after this was 18 February, followed by a second focusing on the most liquidity IRS instruments on 21 February.
February, a shorter month, saw 15,444 IRS trades executed on SEFs with the highest one-day trading total reaching 1,545 trades with US$548.6 billion in notional on 28 February.
The CFTC has approved all five MAT submissions, the last of which – for Bloomberg SEF – went live in March. Despite this, SEF operators have said pending changes to the block trading rule for SEFs and the inclusion of swaps within packaged trades, expected to occur in coming months, will further push buy-side participants to execute on SEFs and increase trading volumes.