Gauging Market Dynamics Using Trade Repository Data: The Case of the Swiss Franc De-Pegging

Abstract

The Bank of England ("the Bank") has access to some of the granular transaction level data resulting from EMIR trade reports. The velocity, granularity and richness of this dataset puts it in the realm of big data in the derivatives market, which brings with it its own set of challenges. These data have a number of potential uses in monitoring the market and helping to set policy. But these uses are only possible if the data are both accurate and complete on the one hand and we are able to analyse them effectively on the other. To help determine the status of these factors, we carry out a study of an external event to see how it was represented in the data. A suitable event was identified in the decision of the Swiss National Bank to discontinue the Swiss franc's floor of 1.20 Swiss francs per euro on the morning of 15 January 2015. This was expected to show a number of effects in the Swiss franc foreign exchange over-the-counter (FX OTC) derivatives market. The removal of the floor led to extreme price moves in the forwards market, similar to those observed in the spot market, while trading in the Swiss franc options market was practically halted. We find evidence that the rapid intraday price fluctuation was associated with poor underlying market liquidity conditions, in particular the limited provision of liquidity by dealer banks in the first hour after the event. Looking at longer-term effects, we observe an increased level of illiquidity, associated with an increased level of market fragmentation, higher market volatility and an increase in the degree of collateralisation in the weeks following the event. It is worth noting that whilst we analyse the impact of the event on the market, we are not commenting on the SNB's policy decision itself.

Networks of Counterparties in the Centrally Cleared Eu-Wide Interest Rate Derivatives Market

“…To our knowledge, this is the first time that the data for the whole centrally cleared ecosystem for the IRD in the EU has been aggregated. Previous analyses concentrated on the reports coming from DTCC alone (as it covers a majority of the reporting for the bilateral IRD trades), or combining two or three TRs [1,7,6]. Second, we provide a clear distinction between house and client clearing.…”

“…5 Formally CME Trade Repository Ltd., DTCC Derivatives Repository Ltd., ICE Trade Vault Europe Ltd., Krajowy Depozyt Papierów Wartościowych S.A., Regis-TR S.A., and UnaVista Limited. 6 Other derivatives classes are credit, commodity, equity and foreign exchange, with a residual classified as others. 7 See the implementing technical standard with regard to the format and frequency of trade reports: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:352:0020:0029:EN:PDF We analyse the IRD market in the EU, as it is one of the largest segments of the derivatives market.…”

“…Finally, in Ref. [6] the authors analyse foreign exchange derivatives in detail, also based on a granular dataset. The experiences of the authors working on the same dataset but different asset classes was of great help in designing this study.…”

Clearinghouse-Five: Determinants of Voluntary Clearing in European Derivatives Markets

“…The EU-wide dataset is available uniquely to the European Systemic Risk Board (ESRB) and the ESMA. I use data from one of these repositories which contains a large majority of the transactions and is thus representative for the whole market, in line with earlier studies (Abad, Aldasoro, Aymanns, D'Errico, Rousova, Hoffmann, Langfield, Neychev, and Roukny, 2016;Cielinska, Joseph, Shreyas, Tanner, and Vasios, 2017;D'Errico, Battiston, Peltonen, and Scheicher, 2016).…”

Use of Credit Default Swaps by UCITS Funds: Evidence from EU Regulatory Data

“…Kenny et al (2016) analyse the CDS market in Ireland and find that non-bank financial institutions, specifically funds and special purpose vehicles (SPVs), account for a majority of the net credit exposure. Cielinska et al (2017) investigate the impact of the Swiss franc depegging from the Euro on FX over-the-counter derivatives markets in early 2015. The authors document the intraday impact of the event on liquidity and prices as well as the longer-term impact on network structure, liquidity and collateral.…”