So how are the CME Deliverable Swap Futures (DSF) doing? Are they living up to the hope (hype?) that as a margin-friendly alternative to cleared swaps they would take the world by storm? Not so much, at least based on the volume and OI figures.
CME data shows that cumulative open interest across all 4 contracts (2, 5, 10 and 30 year) is just below 30,000. Each contract is for $100,000. Monthly average daily volume peaked just below 6,400 contracts a day in May. From the CME website comes the following graphic:
In the meantime, cleared interest rate swaps seem to be booming. Notionals – which we know isn’t a great way to look at things – are growing quickly. According to the July 19th report from LCH, the prior week there was $898 billion in buy-side notional cleared. Cumulative buy-side notional cleared was $46.4 trillion and total client notional outstanding was $7.8 trillion (gotta’ love trade compression and netting to get those outstanding numbers down). From the July 19th data:
The CME cleared swap volumes (and market share, so it appears) are also expanding rapidly. USD Equivalent Open Interest is $2.4 trillion. A graphic from the CME website illustrates:
So can we conclude that DSFs are not getting the critical mass necessary to work? OI in DSF are 0.54% of Eurodollar contract OI, 2.19% of the 10-year UST note future OI. It’s still a little early to write an obituary, but the numbers are hard to ignore.