SOFR Growth Accelerates in 2022 – CME
Posted by Colin Lambert. Last updated: February 14, 2022
Signs that financial markets are rapidly transitioning away from US dollar Libor continue to build up, with CME Group seeing a succession of new record volumes in its Secured Overnight Financing Rate (SOFR), culminating in volume breaching the 2 million contracts threshold for the first time on February 10.
The contract also set a new open interest (OI) record of 3,236,499 contracts on that day, while SOFR options also reached a record 130,200 contracts traded and set a new OI record of 656,977 contracts.
Additionally, SOFR futures packs and bundles achieved a record 259,992 contracts traded on February 10, surpassing the prior record of 172,840 contracts on January 27, CME says.
In February month-to-date, SOFR futures average daily volume (ADV) has grown to 946,794 contracts, compared to what was a record monthly ADV of 731,126 contracts in January.
The gap is also closing fast on volume in CME’s Eurodollar futures, which are linked to Libor. The Merc says SOFR futures ADV is now equivalent to more than 33% of all Eurodollar futures ADV – the SOFR contract is due to replace the Eurodollar contract as a reference in mid-2023 as part of the transition away from Ibors more generally.
Activity will no doubt have been boosted by uncertainty over the extent of the impending Federal Reserve monetary policy tightening, CME says that activity on both Eurodollar and SOFR futures and options has grown to more than 5.5 million contracts a day, with the majority of these futures contracts linked to each other through the ISDA spread.
“Our SOFR futures and options have both grown exponentially since the start of the year, as clients are increasingly turning to our deep, liquid SOFR-based products to manage their risk,” says Agha Mirza, global head of rates and OTC products, CME Group. “In particular, SOFR options are growing at an unprecedented pace for a nascent options market, averaging more than 65,000 contracts per day during the month of February.”