ICE hits SONIA derivatives trading record on UK rates shift

Intercontinental Exchange (ICE) has reported a single day trading record for interest rate derivatives referencing the UK risk free rate amid a flurry of activity as traders reacted to a higher than expected inflation print this week.

The Atlanta-based exchange group on Wednesday traded 1.37 million Sterling Overnight Index Average (SONIA) referencing derivatives. This week's one day record surpassed the previous record on March 13, when the exchange saw 1.17 million SONIA referencing futures and options traded after US regional bank contagion worries roiled markets.

“As the market digests the latest UK inflation data and reviews expectations for interest rate changes, investors are using SONIA futures and options to manage and adjust their exposure for the potential of higher interest rates to continue for longer in the UK,” said Caterina Caramaschi, vice president, Financial Derivatives at ICE.

Open interest was up 28% from the start of the year to the end of trading on May 24, according to figures provided by the exchange. The open interest in the rates complex as a whole is up 14% in the period, to 18.7 million contracts, including an 11% rise in Euribor trading to 15.2 million contracts.

Rival Eurex this week said it is eyeing new European short-term interest rates products based on the European risk-free rate to complement the three month €STR future launched by the European exchange early this year.

CME Group in October launched its own three-month €STR, with 80,0000 contracts changing hands in the first four months (including related spread products).

British clearing house LCH last weekend completed its US dollar Libor conversion with a huge $43 trillion (£34.5tn) tranche of derivatives switching to the US dollar risk-free rate over the weekend of May 20-21.