ICE ESTR open interest doubles in two months to record 350,000 lots

Intercontinental Exchange has doubled the open interest in its Euro Short Term Rate (ESTR) futures contract to a record 350,000 lots in just two months, marking the latest milestone in the race between ICE, Eurex and CME in this growing market.

ICE Futures Europe reported on Monday July 29 350,612 lots of open interest in its ESTR futures contract which was a new record and represented an increase of over 100% from 173,000 lots of OI on May 27.

Stelios Tselikas, head of Interest Rate Derivatives at ICE, said: “Our ESTR market continues to grow at pace, now at over 350,000 lots of open interest, driven by a diverse participant base trading alongside Euribor. What is significant to point out is that end-users account for over 75% of open positions in ICE ESTR futures, a key indicator of the market’s health as it matures."

ICE’s 350,000 lots of OI means that venue had 65% of total open interest in a three-way market where Eurex had on Monday 134,460 lots of ESTR futures OI, which equated to one quarter of the total, and CME had 51,600 lots of ESTR futures OI, which was a tenth of the overall total, according to exchange data.

Tselikas continued: “Liquidity attracts liquidity, and we're seeing that in action as our Top of Book continues to improve with tighter bid-offer spreads. This has been encouraging more major market participants to come on board. We've managed to build a solid and liquid foundation in futures, thanks in large part to the inter-contract spread with Euribor and the margin efficiencies available relative to the OTC market. This foundation is paving the way for us to expand into options trading down the line."

ICE launched its ESTR options contract on April 22 just ahead of CME which unveiled its equivalent options product on May 20. Eurex has yet to launch its ESTR options contract.

As well as OI, ICE Futures Europe also has a solid market share in ESTR futures volumes. The London-based venue traded on Monday 101,800 lots of ESTR futures, which was 45.3% of the ESTR volume total, while Eurex traded 120,200 lots of ESTR futures (53.5%) and CME traded 2,600 ESTR futures contracts, which was 1.2% of the total traded on that day.

ICE, Eurex and CME have been locked since November in a three-way battle for the futures based on the European risk-free rate where CME’s product initially dominated open interest.

CME Group launched on July 1 a European version of its US risk-free rate futures pricing tool in a step to boost adoption of the group's European interest rate futures and options.

ICE launched SOFR and ESTR swap rates on July 1 for use as benchmarks in financial contracts and instruments by licensees.

Speaking to FOW in June, Eurex’s global head of fixed income and currencies product design said it had been “pleasantly surprised” by the volume development in its short-term interest rate derivatives suite.