Fixed Income market briefing July 2023

Reflecting on the performance of the business in Q2, I decided to change the approach for several reasons. In my humble opinion, the numbers do not accurately reflect the overall performance and the hard work put in by the team, our colleagues, the support of our clients, liquidity providers and stakeholders. This update will outline what, how and why the team has been working on specific initiatives, updating you on our progress and where we hope to land come Q4.

For those close to our business, you know that the team is structured into pods to focus on specific markets, where the depth of knowledge and expertise is seen as an enabler for new products and services to be developed. Areas include rates, credit, FX, volatility and ETFs. Why highlight this? Each initiative being worked on is to support our overall strategic objectives. For our team, that is expressed as 'being the incumbent exchange for euro-denominated derivatives and adjacent markets that serve our global client base.' In reality, this means designing products that will be used by our clients for the long term, e.g., credit and ESTR futures. It means adding products and services that are integrated into our risk systems to enhance our margining, services, and data capabilities. Our sole aim is to work with our key internal and external stakeholders, partners to deliver upon this.

This nicely leads me to the announcement of our STIR partnership program at the beginning of June. We view this as a natural extension to our product portfolio that will enhance our ability to offer cross margining across FIC. We have been working with our design partners and the aim is to be live in Q4. The team is committed to working with our members, liquidity providers and end clients to make this a success. We believe we can execute on this. Thank you to each of our design partners for working closely with the team to make this a reality. There is plenty of work still to be done, but we are on the right track. Thank you to the team for all hours spent working hard to get this project off the ground!

The initial step into this has been €STR futures, where we were pipped to the post on launch. Not deterred and believing in our approach, the team has worked hard to bring this nascent market to life. We have now traded over 100k contracts since launch (over €100 billion in notional) and average daily volumes continue to grow. Improved liquidity is also evidenced by tighter spreads quoted in growing sizes. A closer look at trade executions shows numerous instances of sizes well over 100 contracts trading in sequences of automated trades, at one price. Our focus is on growing and building this segment with our clients. A huge thank you to our liquidity providers who are doing a stellar job! Your efforts have not gone unnoticed and are greatly appreciated. It is important to recognize the contribution of each of our stakeholders, as all are required to ensure longevity.

Credit is another segment that the team has been focused on nurturing. Davide Masi literally lives and breathes credit on a daily basis. This is yielding results as the pipeline of end clients and the total number of active accounts is growing. In particular, Q2 saw the most active quarter in terms of traded volumes for this segment, totaling 50,000 contracts traded, while open interest now amounts to EUR 1.7bn. Personally, I am very excited by what Davide has achieved with this product segment and where we can take it. The pipeline of new products and initiatives is deep, so watch this space for more on our plans in the coming months. Staying on the credit theme, ETF options volumes are building, and we are hopeful this continues into H2.

FX has faced headwinds in Q2, yet the pipeline remains healthy. More end clients are in the process of onboarding, and more liquidity support is being nurtured. The team will continue to work with our colleagues in 360T to bring the world of OTC and listed together, which should position the business for future growth. By no means are we complacent about the hard work ahead, and we will strive to build this important segment out.

The pipeline of initiatives for H2 and 2024 is exciting, with the team continually working with our colleagues, partners, liquidity providers and end clients to bring them to life. It is genuinely an exciting time and I think we are positioning the business for solid medium-term growth. 

In short, Q2 has had its challenges which I feel the team has done a tremendous job of managing. At the same time, I am not overly cautious about the outlook in H2. I think the business will benefit from the foundations laid in H1, and I am confident that 2024 will reap the benefits. We are committed to what we have set out to achieve and will work tirelessly to execute on it.

I sincerely would like to extend my gratitude to the whole team, my colleagues, partners and clients for making this an enjoyable first half. Your commitment is gratefully received and acknowledged. Our success is down to your support and is your success too. Thank you.