ISDA Releases Q2 SwapsInfo Report, IRD Trading Activity Declines

The International Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term 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.

Q2 Findings

ISDA’s Q2 2015 research report shows that clearing and electronic Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term 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.

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.