Swap Execution Facility volume in rates swaps dropped by between 30% and 40% on a notional basis in the first week of mandatory trading, according to our analysis. On average, across the three main available data sources, we see a notional drop of between $23 billion and $60 billion per day over the past week, in comparison to average daily notional volumes for 2014.
For the purposes of this analysis, TABB normalized data from three sources: the Depository Trust & Clearing Corporation (DTCC), the International Swaps and Derivatives Association (ISDA) and Clarus Financial Technology.
We limited the scope of our analysis to specific criteria in order to make an apples-to-apples comparison across the three sources, which displayed a high degree of disparity and divergence in their volume estimates. We covered cleared interest rate swaps (IRS) transactions across all currencies and tenors, but excluded Forward Rate Agreements (FRAs) and block trades.
There are many reasons to exclude FRA volumes to achieve a meaningful view. First, FRA volumes are exclusive to the Dealer-to-Dealer market, specifically to ICAP’s Reset and Tullet Prebon’s TPMatch activity. Second, volumes attributed to FRA activity within these two SEFs alone is typically limited to one or two days of the week yet often times more than double the overall volume traded on a weekly basis – effectively obscuring any other trends within the data.