Recently we have started to see stories on large LCH-CME Switch trades (aka Basis Swaps) starting to be traded. See LCH-CME Basis Swaps primed for Growth (trial required) and Trad-X volumes hit record highs as platform introduces CCP position switch service. The first article highlights that $2.5b of 18M and $3b of 5Y traded in the […]
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LCH-CME Switch Trades and Margin Management
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CME-LCH Basis Spread
Recently I noticed that the view statistics for my June 2014 blog on LCH-CME Switch Trades were running at 5 times their weekly average, which I thought was odd. Then on 15-May, I read the Risk article, Bank swap books suffer as CME-LCH basis explodes (subs required) and I understood why. So a good time to re-visit this […]
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Hedging the CME-LCH Basis
Following on from my article on the CME-LCH Basis Spread, I will now look into the details of hedging this basis with CCP Switch trades. Example Portfolio Lets start by constructing an example portfolio of USD Swaps in which we are net receivers in our account at CME and net payers at LCH. Using […]
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CME-LCH Basis – What does the Term Structure tell us?
We analyse the CME-LCH Basis volumes by tenor and look at what the forward curve implies for prices in the future. There are no signs of normalisation trades in the market, with the basis widening over the past week. We suggest some thoughts as to how this may play out for other Currencies and other […]
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LCH Makes Gains vs CME in USD IRS (8-12 Jun 2015)
Following my blog on CME and LCH: What Happened on May 19 and Jun 12, I wanted to re-visit the data now that we have another week of published volumes. Weekly Volumes Using CCPView lets look at weekly volumes of gross notional for just USD IRS for the past 6 weeks and compare CME IRS Volumes with LCH […]
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Pricing and Arbitraging the CME/LCH Basis
I’ve been pondering the appropriate spread between LCH and CME. It would seem to me that every firm should have their own true cost of putting on a swap at CME or LCH, based upon a multitude of factors not limited to how they are currently positioned. I thought it worthy to explore what these […]
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CME-LCH Basis: Convexity in Eurodollar Futures
Tod wrote about monetizing the CME-LCH basis last week by means of a straight 5 year swap. But is there a simpler way to go about it? We explain convexity trades, look at different pay-offs when funding costs are applied and then find evidence in the SDR data of convexity plays being put on with CME cleared […]
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CME-LCH Basis Swaps Volumes Update
Eight weeks and six follow-on blogs later, my CME-LCH Basis Spreads blog continues to be one of our most popular blogs with a high number of daily views. So I thought it was high time I revisited the SEF volumes to see what the data shows for CME-LCH Switch trades. First a note to make […]
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Why Are Bond Issuers Not Taking Advantage of Price Differentials?
Over the past couple months we’ve been documenting the CME-LCH basis trade including: How it’s come about Looked at clearing data for evidence of any movements between venues Looked at SEF data for which SEFs are seeing these flows The implied forward rates in the basis Downstream impacts to the CME convexity trade. Many newcomers […]
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CME-LCH Basis Widens Again
The last article in our CME-LCH Basis category is dated July 15, 2015 and while our regular Swaps Review does cover CCP Basis Swap Volumes, it is now nearly 3 months since we looked specifically at the CME-LCH Basis. So time to see what has been happening. Daily Price History Lets start with a time […]
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CME-LCH Basis Spreads Blow Out
Following on from my Nov 3rd blog on CME-LCH Basis Widens Again, I thought I would look to see if anything interesting has happened since. Well it most definitely has, so lets take a look at the data. Starting with a screenshot of Tradition’s pricing page on BBG from Nov 17th. Wow! 30Y is showing 3.7 bps! An […]
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CCP Basis Spreads: What Next?
Given the recent activity in CME-LCH Basis Spreads (see November review or Spreads Blow Out), we often get asked what further developments we see happening and specifically whether a basis will manifest between non-USD currencies and between other Clearing Houses. This article will look at both of these questions. Indicative CCP Basis Quotes Lets start with a […]
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Identifying CCP Basis Trades in the SDR
We run a programme to identify CCP basis trades in SDRView We successfully identify the trades reported by SEFs every day within the SDR data We also find a surprisingly high number of trades transacted at the same time but at different prices – which are not CCP Basis trades. This suggests that price discovery […]
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How to identify the CCP of trades from the SDR data
We use Linear Regression on price time-series to identify discontinuities in price These discontinuities represent jumps in price We use these jumps to identify which USD IRS trades are cleared at CME This allows us to extract yet further information from the publicly reported data The methodology is dynamic, and therefore is suitable across a range of products and maturities Forecasting Swap Prices […]
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CME Compression and CCP Basis
The CME Compression run in March coincided with a peak in daily volumes for 30 year USD Swaps. Amongst falling Average Daily Volumes in USD Swaps over March as a whole, this extra 30 year activity was particularly noticeable. We also saw a peak in 30 year CCP Basis trading a day before the CME Compression run. We wonder […]
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LCH-JSCC Basis in JPY Swaps
Last week a number of our readers alerted us to the sudden formation of a Basis in Yen Swaps between LCH and JSCC, which is interesting to say the least. So lets look at what the data shows. Indicative CCP Basis Quotes Tradition kindly sent us a screenshot of their new page. Showing, Yen IRS dealer quotes at JSCC, […]
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LCH-JSCC Basis: An Update
My blog last week on LCH-JSCC Basis in JPY Swaps has been massively popular and now that we have another week’s data under our belt, it is worth an update. Indicative CCP Basis Quotes Let start with Tradition’s page as of Friday April 22, 2016. Showing, Yen IRS quotes at JSCC, Yen IRS quotes at LCH, LCH/JSCC Basis and 6v3 […]
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LCH-Eurex Basis in EUR IR Swaps
In my Dec 2015 blog, CCP Basis Spreads:What Next, I opined that we would see CCP Basis Spreads becoming significant in non-USD Interest Rate Swaps and I subsequently covered the LCH-JSCC Basis in JPY Swaps. Today I will look at the LCH-EUREX Basis in EUR Swaps. Broker Quotes Lets start with Tradition’s EUR CCP Basis Swaps prices […]
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CME-LCH Basis For Dummies
We occasionally still get asked about the price differential between CME and LCH swaps. I typically refer folks to our online articles that have explained the phenomenon. Since 2014, we have written 18 separate pieces on the CME-LCH basis spread. A few of the ones that begin to quantify it include: May 20, 2015 – […]
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CCP Basis and Volume in Major Currencies
Almost a year has passed since we last looked in detail at CCP Basis, which just goes to show how normal and accepted this has become in the market. Since the shock emergence of the CME-LCH Basis Spread in June 2014, we have seen regular trading of CME-LCH Switch trades to manage the CCP Basis […]
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