First electronic SOFR vs Fed Funds compression trade executed via Bloomberg SEF

Bloomberg announced that the first electronic SOFR versus Effective Federal Funds Rate (“EFFR”) basis swap compression trade was executed on the Bloomberg SEF (BSEF). The participants successfully executed a 10-year cleared swap unwind (equal and opposite to an original cleared position), using request-for-quote through Bloomberg’s list trading tool, BOLT, to achieve compression of the original position at CME, where the swap was cleared.

Bloomberg supports trading on coupon, basis spread and Net Present Value (NPV), allowing clients to rebalance portfolios from LIBOR to Risk Free Rates. These workflows are complemented by portfolio analytics to calculate margin costs, analyze key rate risk and evaluate what-if scenarios all seamlessly integrated with BOLT.

Clients have had access to trade USD SOFR outright and basis product suite electronically since 2018, alongside offerings in other major currency Risk Free Rate products set to replace LIBOR as market standard.

“The Libor transition requires a synchronized effort, which is essential to a sound and resilient financial system,” said Steven Doherty, director for public investments at Northwestern Mutual, in a statement. “Executing the first electronic trade using this new enhanced functionality creates efficiencies and supports our goal of maximizing long-term investment returns for our policy owners, while maintaining our unsurpassed financial strength.”

“Libor transition is one of the most important changes in the Rates and FX market today. Wells Fargo’s Macro sales and trading team will remain dedicated to supporting this critical evolution for our clients, including providing technology solutions for efficient execution of SOFR risks,” said James Wang, global head of Institutional Interest Rates & Foreign Exchange Sales at Wells Fargo, in a statement.

“Compression is a crucial tool for cleared market participants, and the ability to compress SOFR versus EFFR trades is of particular significance for our clearing members who are looking to boost operational and capital efficiency,” said Sunil Cutinho, president at CME Clearing, in a statement.

Read the full release

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