CurveGlobal launched in 2016 with lofty goals: to drive competition, reduce costs and fuel execution innovation in the interest rates futures markets. The exchange, a joint venture founded by the London Stock Exchange Group (LSEG) in partnership with several large banks and Cboe, recorded its first notable volume surge in 2019 after the introduction of MiFID II. Now with the market transitioning from LIBOR to SONIA, results are again setting new records. Volume and open interest hit peak levels in Q1 and although Q2 results aren’t available yet, the exchange reported “upward trends are expected to continue.”
Last week, LSEG announced a partnership between CurveGlobal and TT that provides our users who aren’t yet trading CurveGlobal with free market access. To help better acquaint our readers with the exchange, we took this opportunity to chat with CEO Andy Ross.
Thank you for talking with us today. Let’s start with an introduction. Please tell us about CurveGlobal, how you came to the organization and your current role there.
Andy: CurveGlobal Markets is a Listed Futures Exchange, the derivatives segment of London Stock Exchange Plc. We are an industry partnership with a mission, to bring competition, cost efficiencies and execution innovation to interest rates futures markets. Our STIR products available are CurveGlobal 3M Euribor, 3M Sterling, 3M SONIA and 1M SONIA. The big difference is that the CurveGlobal futures clear at LCH and can margin versus swaps/each other.
I am the CEO of CurveGlobal, I joined CurveGlobal in 2016 and am in charge of Curve’s build of open interest, product innovation and key stakeholder management. My aim is to build CurveGlobal Markets into a best-in-class fixed income futures derivative exchange. Previously I was Managing Director at Morgan Stanley where I was the Global Head of Listed Electronic Execution & European Head of Derivatives Clearing.
Your Q1 set a new record for growth. Congratulations on that. What’s driving the continued rise in volumes and open interest?
Andy: Yes, Q1 2021 was our best quarter ever in terms of volumes. We also doubled our open interest, with our GBP futures complex open interest up 200% on a notional basis since our fee holiday started in October 2020. BNP Paribas went live and a bank that joined in Q4 2020 went live with portfolio margining.
There are numerous reasons for this strong performance:
- We are offering fee-free trading and clearing until 30 September and no market data costs
- Participants can generate substantial savings by trading between the bid and the offer through our blocks
- All CurveGlobal products clear at LCH so market participants can benefit from portfolio margining against OTC products
- Easy electronic access such that brokers and trading systems, such as TT, provide access to good or better pricing on the exchange electronic order book
With LIBOR to be discontinued at the end of this year, what are your observations regarding that status of the transition to SONIA?
Andy: The Bank of England and FCA recently released a statement encouraging market participants to switch the default traded instruments to SONIA instead of LIBOR from 17 June for Listed Derivatives. This is a huge move for the market and CurveGlobal has been helping to enable the shift since the formation of SONIA. 40% of our GBP Futures volumes is now in SONIA Futures compared to 13% in October last year. We look forward to continuing to help the market in this important effort. We think it’s critical that all customers evaluate as they switch to SONIA and consider if they should do a double take–Do the double switch into SONIA on CurveGlobal.
What impact has the pandemic had on your business, and what sustained changes (if any) do you anticipate will be part of “the new normal” as a result?
Andy: To be completely transparent, CurveGlobal did not perform as well as we would have liked at the start of the pandemic. During the period of high volatility, our trading volumes were lower as people working from home reverted to the incumbent. From October 2020, we offered a year-long fee holiday, new Tier 1 banks went live and our market started to grow. Q4 2020 and Q1 2021 were our best quarters ever. BNP went live in April and new customers are joining all the time. What was exciting is that during the market volatility in recent months, we have been able to maintain and grow our market share, meaning that people are using the market continually.
What’s in the pipeline for CurveGlobal later this year and beyond?
Andy: We will continue to focus on growing our sterling market; being a leader in the transition to SONIA is very important to CurveGlobal. We are making the transition as smooth and as seamless as possible. Our mission is to persuade market participants that trading SONIA on CurveGlobal Markets is a better choice than just rolling over their existing positions at the competition. But, it’s not just about LIBOR going–this is a catalyst to reimagine the market better and CurveGlobal Markets is unique in offering the ability to clear and portfolio margin SONIA futures alongside SONIA swaps.