Forums  > Trading  > exchange-listed STIR products vs OTC activity  
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Total Posts: 47
Joined: Nov 2013
Posted: 2017-05-17 05:34
Pardon my naivete, pretty please...

Are there significant concerns to be had when modeling market microstructure in STiR futures spreads (Euribor, Sterling, Euroswiss) in relation to OTC activity? Certain times of day (e.g. Europe session open/close) where OTC liquidity challenges 'normal' behavior of these products on LIFFE? Say, the 'EUR Ann 30/360 vs 3M EURIBOR' swaps like mentioned on pg. 21 of ISDA paper - Transparency in Over-the-counter Interest rate derivatives Markets

I'm familiar with trading the term structure using spreads, but never had notion to consider OTC effects, if any. Looking to automate, and for sake of modeling correlations among the different time spreads, wondering if certain phenomena come into play from OTC.

"How be caught up in a game and have no idea of the rules." - C.S.


Total Posts: 866
Joined: Oct 2008
Posted: 2017-05-17 13:01
In the past I would have said that the only phenomenon along the lines that you describe that could possibly have a meaningful effect is the publication of the ISDAFIX rates. Given that it's now much more policed, however (and there's reform in the pipeline), I can't imagine the shenanigans to be significant enough to affect listed stuff.

Obviously, this is not to say that there don't exist more structural effects where the OTC mkts affect listed ones.

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...


Total Posts: 314
Joined: May 2006
Posted: 2017-05-25 15:22
I won't pretend to be an expert on STIR contracts.

But that is the most liquid market in the universe, orders of magnitude more liquid than all other listed markets put together. There is no way that some swap traders can move it, let alone on a regular basis. Swap books are calibrated to futures, not the other way around.

The Fed can move it. Or BoE, ECB, BoJ etc. But I doubt that swap trading even registers.

"There is a SIX am?" -- Arthur


Total Posts: 216
Joined: Dec 2010
Posted: 2017-05-25 16:49
I guess I don't understand the question. Not sure what you mean by "challenging normal behavior of these products."

Other than that it seems completely obvious to me that the swap market moves the STIR market and vice versa. In fact I wonder if the swap market doesn't stir the STIR market, then who does?


Total Posts: 1412
Joined: Jun 2004
Posted: 2017-05-25 17:04
its a while since i worked in fixed income FO but doesnt it depend on the currency (GBP short sterling is pretty liquid, whereas in EUR the bund/bobl are liquid but aren't a perfect hedge for the swaps)


Total Posts: 47
Joined: Nov 2013
Posted: 2017-05-25 18:26
@mtsm sorry, that was word salad...the question is just if OTC *influences* lit exchange price/volume behavior, generally, or at certain times of the day (e.g. Europe session close).

"How be caught up in a game and have no idea of the rules." - C.S.
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