ISDA Releases Q2 SwapsInfo Report, IRD Trading Activity Declines

Total average daily IRD notional volume fell by -6.4% YoY, while the average IRD trade size fell by -19.5% YoY

The International Swaps and Derivatives Association (ISDA), an industry body representing participants in the over-the-counter (OTC) derivatives market, has reported its SwapsInfo Quarterly review for Q2 2015, according to an ISDA release.

The primary function of ISDA’s SwapsInfo Quarterly Review is to help provide an analysis on interest rate derivatives (IRD) credit default swap (CDS) index trading activity in the industry. The report itself was populated by a series of publicly available data, which was important in ascertaining the impact of recently implemented regulatory changes on respective electronic and bilateral trading volumes.

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Q2 Findings

ISDA’s Q2 2015 research report shows that clearing and electronic execution has continued to play an integral role in total trading activity during the aforementioned period. In particular, a quick look at the average daily trading statistics in Q2 2015 showed that 67.4% of average daily IRD trade counts and 74.7% of average daily notional volume were cleared.

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Additionally, more than half of all average daily IRD trading activity, approximately 51.2% by trade count and 56.4% by notional volume was executed on a swap execution facility (SEF) during Q2 2015.

In quantitative terms, the total average daily IRD trade counts rose during Q2 2015 by a factor of 16.3% YoY from Q2 2014. However, notional volume fell by -6.4% YoY during Q2 2015 when compared with the Q2 2014. This finding was exacerbated by the average IRD trade size, which also declined by -19.5% YoY since Q2 2014.

In terms of IRD average daily trade counts, Q2 2015 incurred a decline of -6.8% QoQ from Q1 2015. Furthermore, the average daily notional volume decreased by -3.8% QoQ from Q1 2015, while average trade size rose by 3.3% QoQ from Q1 2015.

Last month, ISDA released a classification letter on the implementation of European Market Infrastructure Regulation (EMIR), which was intended to enable counterparties to notify each other of their status for clearing. The classification letter essentially allows counterparties to bilaterally communicate their status by answering a series of questions, geared towards meeting the regulatory obligations of the EMIR, due to come into force in 2016.

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