The Made Available to Trade (MAT) rules being introduced by the Commodity Futures Trading Commission (CFTC) are causing further fragmentation of liquidity in the swaps market, according to a new report.
The research, published by the International Swaps and Derivatives Association (ISDA), shows that since the MAT rules were introduced on 15 February “USD MAT swap volume increased while EUR MAT swap volume sharply decreased as a percentage of total SEF volume”.
“As a result, SEFs are becoming even more USD-centric, offering less liquidity to EUR and GBP MAT trading,” the report concludes.
According to data that it collected from the Depository Trust & Clearing Corporation (DTCC), since the MAT rules were introduced USD MAT average daily gross notional and trade counts have increased 29% and 36%, respectively. In contrast it showed that the EUR average daily gross notional and trade counts have decreased by 30% and 11%, respectively. The average EUR MAT trade size also shrunk 21% as the market became less liquid.
“The MAT rule appears to have created smaller, less liquid pools for EUR and GBP swaps relative to USD swaps,” the research concludes from the data.
This latest report builds on ISDA’s earlier research on the cross-border fragmentation of the global OTC derivatives market, which showed that European dealers had begun to move away from trading with US counterparts after SEF trading was introduced in the US.