Where is ESTR? (2)


A couple of weeks ago, I asked "Where is ESTR?". That question resonated with a legal journal. The blog and a subsequent interview were the starting point of an article in Practice Insight - IFLR. Practice Insight is a "news service for lawyers, tracking how financial institutions are implementing Europe's capital market rules" (subscription required).

Since then the clearing volume for June have been published by LCH. The volume was around 72 bn, i.e. barely a third of what is was in January and February. With a couple of weeks to go to the "big bang", one has to wonder what will happen then. The volume since the creation of ESTR is reported in the graph below. No upward trend is visible.



Note that the EONIA = ESTR + 8.5 bps is true only to end of 2021. This means that the market data for OIS EONIA swaps with maturities beyond that data, i.e. OIS 2Y to 30Y, cannot be used to infer the market data for ESTR. I still wonder how CCPs will obtain sufficiently liquid data (and BMR compliant data) to obtain a fair cash compensation computation.

Note added: Risk.Net has run a similar story in "Slump in ESTR swap volumes at LCH leaves market guessing" (subscription required) published on 31 July 2020. As often, you have read it here first.

Note added 2020-08-05: The July figures are reported in the next episode of the post: Where is ESTR? (3)

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