January 15, 2014

FX NDF Trading on SEF platforms | ClarusFT


This articles looks at Non-Deliverable FX Forwards data for USD/BRL, USD/INR, USD/CNY & USD/KRW currency pairs. It analyses trading volumes by On SEF vs Off SEF and Cleared vs UnCleared.


As we recently added the FX Asset Class to SDRView, I took a look at what the US DTCC SDR data shows for Non-Deliverable FX Forwards trading with respect to On SEF vs Off Facility.



Lets start with a chart of volumes from 6 January 2014.


From which we can observe that:

  • the percentage of On SEF trading ranges from 38% to 25% of trade volume reported to DTCC
  • which is higher than I would have expected
  • given that there has not been much regulatory focus on FX relative to Rates or Credit

Looking in more detail at the gross volumes and count of trades reported on 6 January.


From these we can observe that:

  • Large daily volumes are traded ranging from 5 billion to 10 billion for these pairs.
  • Of which the On SEF volume is around $2 billion for each.
  • The trade counts are relatively high, particularly for INR & KRW
  • For INR & KRW the average notional traded Off SEF is much smaller than On SEF
  • In addition there are no large trades that hit the Cap Size, so unlike Rates or Credit, here we are seeing the actual volume.


Cleared vs UnCleared

An interesting contrast to On SEF vs Off SEF is to look at the NDF Volumes but for Cleared vs UnCleared.

Which for 6 January, shows the following:



From which we can observe that:

  • A very small fraction (<1% in notional terms) is Cleared
  • Very different to On SEF %, but perhaps not surprising given that there is no mandatory requirement to clear FX NDF trades.
  • We could of-course look over a longer period, a week or a month, but having checked this, I can state that the above holds.


What else is interesting in the FX NDF data?

Well there is a lot.

Lets start with just two.


1. Trend in USD/BRL On SEF Volumes

Looking at the weekly volume since October 2, 2103 (the start of SEF trading) for USD/BRL, we see the following trend.


Which shows a real spike in On SEF trading volumes from mid November. Not surprising as we would expect it took some time post 2 October for firms to start trading significant volumes On SEF.


2. More Currency Pairs

There is significant volume not just in the four currency pairs highlighted above, but in an additional eight currencies, both for On SEF and Off, as the chart below shows.


Closing Remarks

There is now a lot of interesting data for FX NDFs in SDRView.

For each of the twelve major currency pairs, we can see:

  • On SEF vs Off SEF volumes and counts
  • Cleared vs Uncleared volumes and counts
  • Daily or Weekly volumes and trends

And a whole lot more of interest.

But that is for another time and another blog.

In the meantime, I invite you to take a look yourself at SDRView.

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