Dealer Rankings 2019: Storms pass

**The results of the dealer rankings poll and the associated feature are protected under copyright laws. Reproduction of the feature and/or the poll results, for either internal or external distribution, is strictly prohibited without the prior written permission of Total Derivatives.**

For information on reprints of the rankings, and permission to reproduce the results in any form, please contact sunil.sharma@totalderivatives.com or call +44 (0)20 7779 8556.

Dealer Rankings 2019: Storms pass

Jeremy who? A confluence of event risk over the last few months has been traversed with an acceptable level collateral damage, leaving Treasury yields almost 50bps above late summer lows, and bank stocks up 25% over the same period.

But that doesn’t mean the coast is clear for risk assets and rate hikes. In Europe, the risk of a chaotic departure from the EU unexpectedly ratcheted up again just days after the election. An unpredictable US President faces both impeachment hearings and an election over the next year. European economies remain fragile. And global regulators are sounding increasingly worried about the state of preparations for LIBOR’s funeral.       

Indeed, many of the more interesting responses to the questions asked alongside the Dealer Rankings concerned the transition away from LIBOR.

Slightly unexpectedly, a majority of those who responded tended to agree with the view that dollar LIBOR will die on schedule at the end of 2021. However, in the meantime, fresh repo volatility is expected to increase scrutiny of SOFR and unsettle short end swap spreads again. On the other side of the fence, LIBOR trading could be “disrupted” by the Fed’s “active commitment” to push SOFR forward. Even options and cross-currency traders seemed resigned to a move to SOFR, eventually. Still, an alternative view was proposed in which LIBOR turns into a “zombie” rate cursed to live “forever”, presumably with bits gradually dropping off over the years.

In the Eurozone, progress towards the adoption of risk-free rates has been more sluggish. €STR has been published for only a few months and ISDA is still consulting about the details of EURIBOR fallbacks. But even living in the slow lane, dealers seemed to accept that change is coming down the pipe. €STR options are seen emerging after a rise in issuance and a switch to €STR discounting in 2020 H2, despite clear doubts about the likely liquidity of non-linear risk-free rate products.

Finally, benchmark reform was not the only topic of interest for the Eurozone trader community. Will the ECB ever hike rates? (“Since we're still pretty young, let's say yes... but not in the near future”). How will a Lagarde-led ECB differ from Draghi’s regime? (more “transparent,” “political” and “consensual” (potential vol killers) but also potentially “less dovish,” according to some).  What’s going to drive the euro long end? (“fiscal policy”, “EIOPA discount rates” and “yield grab”). And what kinds of structure are likely to prosper? (CMS1010 due to “insurer constraints”, with “yield enhancement twists,” “repacks with ESG or green collateral”. However, even in the world of structured notes there was concern about the impact of transitioning away from EURIBOR (“need to sort fallbacks but CMS should prosper otherwise,” judged one dealer).

The results of the Dealer Rankings

Global first place - across all interest rate derivative products - again went to JP Morgan. However, there was plenty of movement among the rest of the top five. Barclays climbed to global second place, Goldman Sachs rose to third and Morgan Stanley pushed up to fourth. Citigroup slipped to fifth while Deutsche Bank dropped out of the top five.

By currency, JP Morgan stayed top for USD interest rate derivatives. It was followed by Citigroup in second place and Morgan Stanley in third. JP Morgan also retained first place for EUR derivatives, while Deutsche Bank kept second and Barclays held on to third place in EUR. Barclays also consolidated its first place in GBP derivatives ahead of NatWest Markets in second and Goldman Sachs in third. Mitsubishi UFJ remained first in JPY derivatives ahead of Mizuho.  

Across products, JP Morgan just pipped Barclays for first place in global inflation, with Goldman Sachs third. JP Morgan retained its lead in global options, but Barclays moved up to second in options and Morgan Stanley was third. Morgan Stanley remained in first place for interest rate structured MTNs, with JP Morgan rising to second and Goldman Sachs placed third.

Looking by market and product, JP Morgan held the top slot for USD IRS trading for both the 2-10 year and 10-50 year buckets, ahead of Citigroup in second and Bank of America third.

JP Morgan was also first in USD options, in front of Morgan Stanley in second and Citigroup in third. JP Morgan also took the top slot for USD inflation ahead of Citigroup and Barclays. Dollar structured MTNs were led by Morgan Stanley followed by JP Morgan, with Goldman Sachs third.

In EUR IRS, JP Morgan remained in first place for 2-10 year and 10-50 year swaps. Deutsche Bank was second for 2-10 year and Barclays was third. In 10-50y swaps Barclays and Deutsche Bank were joint second. BNP Paribas slipped to fourth.

In EUR options trading, JP Morgan was first again while Barclays moved up to second. Deutsche Bank was third and Goldman Sachs fourth.

Barclays kept first place for EUR inflation, ahead of Deutsche Bank and BNP Paribas. Morgan Stanley moved back to first place for EUR structured MTNs from Goldman Sachs and JP Morgan in joint second, and Credit Agricole fourth.

JP Morgan remained in first place for EUR/USD cross-currency basis for the fourth year in a row, followed by Deutsche Bank and Citigroup in second and third place, respectively.

In GBP interest rate derivatives, NatWest Markets was top again for 10-50 year swaps but Barclays came first in the 2-10 year bucket. Barclays was also first for both GBP options and inflation, while JP Morgan was second for options and NatWest Markets was third.  Goldman Sachs was third for GBP options and inflation.

Finally, JPY swaps and options saw Mitsubishi UFJ, Mizuho, Sumitomo Mitsui and Nomura fight for the top three places, with Mitsubishi UFJ placed first in 2-10y swaps while Mizuho led in 10-50y swaps and yen options.

All interest rate derivatives

USD 2-10y IRS

USD 10-50y IRS

USD interest rate options

USD inflation derivatives and cash

USD interest rate structured notes

EUR 2-10y IRS

EUR 10-50y IRS

EUR interest rate options

EUR/USD cross-currency basis

EUR inflation cash and derivatives

EUR interest rate structured notes

JPY 2-10y IRS

JPY 10-50y IRS

JPY interest rate options

JPY inflation derivatives and cash

GBP 2-10y IRS

GBP 10-50y IRS

GBP interest rate options

GBP inflation derivatives and cash

All USD interest rate derivatives

All EUR interest rate derivatives

All JPY interest rate derivatives

All GBP interest rate derivatives

All IRS

All interest rate options

All inflation

All interest rate structured notes

The methodology

Total Derivatives’ rankings are the most comprehensive peer review of dealers’ performance in interest rate derivatives trading. There were 800 individual responses to the latest rankings, registering a total of over 2,300 votes. Experienced professionals involved in trading, sales and marketing, structuring and strategy at investment banks formed the largest group of respondents, with portfolio managers at asset managers and hedge funds also taking part. Voting took place in October and November 2019.

To recap, respondents are asked to rank the top three dealers (other than their own institution) based on reliability of market-making, keenness of pricing, depth of liquidity provision, speed of execution, access to e-trading platforms, efficiency of post-trade processing and product innovation.

Market-makers are ranked in dollars, euro, yen and sterling. Product categories include two year to 10-year interest rate swaps, 10-year to 50-year interest rate swaps, inflation (cash and derivatives), interest rate options, EUR/USD cross-currency basis swaps and interest rate structured MTNs in USD and EUR.

For information on reprints of the rankings, and permission to reproduce the results in any form, please contact sunil.sharma@totalderivatives.com or call +44 (0)20 7779 8556.