ICE Reveals Derivatives Trading On SONIA Reached A New Peak
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Derivatives trading activities on the Sterling Overnight Index Average (SONIA) reached a peak of 1.37 million futures and options contracts on May 24, according to a statement by the International Exchange (ICE).
Derivatives trading on SONIA hits a new peak
The new record that was announced by ICE has surpassed the previous record of 1.147 million SONIA futures and options contracts that were traded on February 2, 2023. SONIA is a benchmark interest that is used for short-term unsecured lending activities within the United Kingdom.
ICE is a leading global exchange that also doubles as a clearing house operator. The exchange has said that the new peak performance can be attributed to the changes that have been made by investors that have adjusted their exposure to the benchmark in case the interest rates in the UK remain high for longer.
UK investors are also making adjustments to exposure. The change is a reaction to the latest inflation data in the UK. The inflation data led to investors reviewing their expectations about any changes in interest rates.
ICE has said that on May 24 this year, more than a million SONIA future was traded, with the month also seeing significantly higher activity than the previous months. The open interest that has also been reported across the SONIA futures and options has also increased by 28% since the beginning of the year.
“On May 24, 2023, over 1 million SONIA futures traded, with high levels of activity in the June, September, and December 2023 SONIA contract months. Open interest across SONIA futures and options is 2.6 million contracts, up 28% since the start of the year, with open interest out to December 2028,” ICE said.
SONIA trading activity outperforms previous peaks
The previous record trading activity for SONIA futures and options that was reported for February 2 was largely driven by the return of investors to the UK markets. The performance also shows that investors have renewed their confidence in the UK interest rate markets after the effects triggered by the mini-budget last year.
The previous records by ICE show that the SONIA futures contracts had posted a record 979,561 SONIA futures contracts, with the figure representing a 19% increase compared to the previous period.
The President of ICE Futures Europe, Chris Rhodes, commented on the development saying that SONIA futures and options markets were benefiting from the steps that were taken in 2022 to ramp up liquidity. SONIA is used as a benchmark for risk management and pricing the interest rate risk in the UK.
Rhodes further said that the record volumes and the increase in Euribor volumes in the last year had triggered excitement in the European rates environment for traders. On the other hand, the options and futures trading on the Euro Interbank Offer Rate, which is used by Eurozone banks to provide short-term euro-denominated loans, reached a 10-year record with 49.5 million contracts traded in March this year.