Interest rate swaps trading keeps moving from Britain to the US and the EU, as there is still no financial services equivalence agreement in sight.

It is Osttra (the result of a recent merger of MarkitSERV with CME’s optimisation businesses), that presents a quarterly review of how volumes have developed for interest rate swaps (IRS) in USD, EUR and GBP, across venues in the corresponding markets, plus Singapore.

It shows that UK OTC IRS trading volumes were continuously moving to EU and US venues in thee second quarter, following the dramatic moves in early 2021. UK MFTs (Managed File Transfer) and OFTs (Office of Fair Trading) activity fell from 10 percent in March to 9 percent in April and 8 perceent in May and June 2021.


Kirston Winters, managing director at MarkitSERV, comments: “OTC derivative markets are global in nature and very agile and with no sign of an equivalence agreement in sight, there has been an inevitable fragmentation of IRS trading volumes.”  

As a result, EU firms must meet the EU DTO (Derivatives Trading Obligation) by trading certain OTC Interest Rate Swaps on an EU MTF/OTF or an ‘equivalent’ venue, currently limited to US SEFs (Swap Execution Facility) and Singapore based venues. According to the OSTTRA report, this means that EU, UK and US firms are faced with specific challenges, with access to global on-venue liquidity – though UK firms cannot access EU venues (except in some special cases where temporary relief is available) and EU firms cannot access UK venues.