As Dodd-Frank Day Dawns, Market Trends Emerge (CME Group, TABB Group, LLC)

March 2013

KEYWORDS: buy-side firm, CDS, CFTC, clearing, Commodity Futures Trading Commission, credit default swaps, futures, futurization of swaps, ICE, interest rate spreads, OTC derivatives, over-the-counter derivatives, SEC, Securities and Exchange Commission, swaps

Authors:

Will Rhode

Organizations:
  • CME Group, TABB Group, LLC

Summary:

“Dodd-Frank Day” on March 11, when most active users of swaps in the U.S. had to comply with the central clearing mandate as part of over-the-counter derivatives reform, has come and gone, but the impact of this occasion has been evident for some time now, according to TABB Group, LLC.

Since the Commodities Futures Trading Commission’s November announcement of a timeline for the clearing of interest rate swaps, basis swaps other instruments, two trends have emerged, Will Rhode, Principal and Director of Fixed Income Research, said in a new report.

“The first is a visible uptick in client clearing for interest rate swaps,” Rhode said. “The second is a negative effect in credit default swaps clearing – possibly the result of the so-called swaps futurization trend.”

At CME Group, clearing of interest rate swaps has increased 59% to $904 billion in outstanding interest as of March 5. Underscoring this growth is the increase in weekly flows since the CFTC announced the clearing timeline, which have topped $33 billion recently, more than six times levels before the end of November.

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