Where is ESTR?

EONIA is a derivative of ESTR and EONIA will not be published anymore as of January 2022. The new definition of EONIA, since October 2019, is ESTR + 8.5bps. EONIA does not add any financial advantage, but add legal risks.

The fixed spread is often described as trivial. To my point of view it is not so trivial in practice as a 8.5 bps spread on the overnight rate is not the same as a 8.5 bps spread on the swap rates. There is a tradition of OIS with spreads, but the spread is on the final (compounded) rate, not on each fixing. The situation is different for LIBOR swaps, where there are composition with spreads (the famous straight, flat, spread exclusive and none, compounding methods). Similar issues are probably true with collateral. From a system perspective, ESTR + 8.5 bps is not the same as EONIA.

As of 15 June, around 43,946 bn USD equivalent of EUR OIS have been cleared at LCH year-to-date. That correspond to roughly 8,000 bn a month.

As end of may, there were 492.75 bn USD equivalent ESTR OIS cleared at LCH up to end of may, roughly 98.55 bn a month, or 1.25% of OIS total volume. This is on average. What is probably worst is that the trend is very bad. The figures for the first 5 months are 191.76 198.10, 50.57, 42.87, 9.45. (see Figure 1 for numbers since inception). The monthly notional has been divided by 20 since the first month of the year. For the number alone, it would look more that ESTR is about to get extinguished and EONIA is taking over.
Figure 1: Monthly ESTR volume at LCH.

Hence my question, where is ESTR? Why are banks still trading EONIA? Is it system issues? Is it laziness? We are one month away from the CCP imposed collateral change big bang. What will happen after that big bang? Will the OIS market collapse? Will the market still trade predominantly EONIA?

Note added: I have not found the same detailed statistics for EUREX. If they are available, don't hesitate to add the link in the comments. I would be happy to comment on them.


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