Real-Time Market Data for Emerging Markets IRS

This blog originally appeared on Refinitiv.com here.

Emerging market debt and derivatives have always been intriguing asset classes for those looking to diversify their exposure to developed economies, but they’ve also come with a unique set of challenges. Fragmented data, siloed reporting mechanisms and language barriers have made it difficult to get a read on accurate pricing, cross-market trends or the impacts of macroeconomic or geopolitical events on emerging markets yields. The result has been a sort of trade at your own risk mentality that has kept emerging markets on the fringes of fixed income and derivatives trading strategies for many years. Now, thanks in part to increased adoption of electronic trading in emerging markets, that stigma is starting to fade.

The growth of electronic trading

As a case in point, consider recent trends in trading volume in emerging markets interest rate swaps on the Tradeweb platform. Through to October this year, approximately $1.7 trillion in emerging markets interest rate swaps volume was executed on the platform. That compares to roughly $1.4 trillion for the full year 2021 and $470 billion for all of 2020. Likewise, the number of market participants trading on the platform has also grown exponentially.

This growth in electronic trading has had a significant impact on transparency in emerging markets fixed income and derivatives because it has introduced, for the first time, a consistent and reliable means of tracking and analysing real-time trading data. Currently, around 5% to 6% of the cleared emerging markets interest rate swaps market is traded electronically, up from 0% just two years ago. Of that total universe of EM electronic swaps trades, roughly 95% is traded on Tradeweb (source: SEF published data).

Greater transparency, greater insight

As a result, Tradeweb is now able to produce fully transparent data on all cleared emerging market interest rate swaps volume on its platform, including composite pricing, yield curves and historical data for 16 emerging markets currencies. These include the Brazilian real, Chinese yuan, Hungarian forint, Indian rupee, Mexican peso, South African rand and more. As the chart below indicates, this data can be used to track yield curves over time, providing vital intelligence on market-specific responses to changes in macroeconomic sentiment, interest rate moves and other variables.

This level of real-time cross-market intelligence was not previously available. Emerging markets trading desks looking for this level of granularity would have had to pick up the phone to connect with dozens of trading desks across geographies to get some semblance of where these opaque markets were trading and then cobble together their own curve based on those estimates. Now, that data can be accessed with a click.

Available from Refinitiv

Tradeweb's emerging markets interest rate swaps data sets can now be accessed via Refinitiv® Eikon, Tick History (limited history and currencies), Feeds and Refinitiv Real-Time Managed Distribution Service in a variety of delivery mechanisms, including API, desktop, deployed/onsite servers and Microsoft® Excel®. Available data formats include CSV, XML, JSON, Python and User Interface in real time, real time delayed and daily frequencies.

This is a big breakthrough for emerging markets derivatives markets that will keep getting more robust as electronic trading volumes continue to grow. Supporting a wide range of trading strategy, risk management and trend analysis functions, this data can now be used to enhance or confirm trading strategies, mark books more accurately, add new dealer selection and perform transaction cost analysis based on a standard pricing benchmark.

As the proportion of emerging market interest rate volumes traded on the Tradeweb platform continues to expand, we will be able to extract even more granular data points on key market moves to better inform Refinitiv customers.

To find out more about how Tradeweb's data can power your emerging markets investment decisions, contact your account manager or click here.

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