Swap execution facilities’ volumes are expected to hit all time highs in October – for the second month running, according to TABB Group and ISDA. About $2.8 trillion notional in interest rate swaps changed hands via SEFs in September, 30 percent above the previous 2014 average.
End users hoping to avoid using standardized IRS have slowly had to come to grips with the fact that regulators’ desire to have derivatives standardized, traded transparently and centrally cleared is coming to fruition. Banks are pulling back from doing bilateral transactions as capital requirements weigh on the business. Stuart Lewis, group chief risk officer at Deutsche Bank, was quoted in RISK magazine saying the IRS business was becoming a loss leader.
TABB reports that when it published its first SEF trading report in early April, only 44 percent of the USD IRS market was traded on-SEF. Now, the majority is traded on-SEF. Meanwhile, 85 percent of credit default swap notional volume is traded via SEFs, up from less than half a few months ago.