• 4 minutes Pompeo: Aramco Attacks Are An "Act Of War" By Iran
  • 7 minutes Who Really Benefits From The "Iran Attacked Saudi Arabia" Narrative?
  • 11 minutes Trump Will Win In 2020
  • 15 minutes Experts review Saudi damage photos. Say Said is need to do a lot of explaining.
  • 13 mins Ethanol is the SAVIOR of the Oil Industry, Convenience Store Industry, Automotive Supply Chain Industry and Much More!
  • 16 hours Saudi State-of-Art Defense System looking the wrong way. MBS must fire Defense Minister. Oh, MBS is Defense Minister. Forget about it.
  • 10 hours Let's shut down dissent like The Conversation in Australia
  • 6 hours One of the fire satellite pictures showed what look like the fire hit outside the main oil complex. Like it hit storage or pipeline facility. Not big deal.
  • 2 hours Instagram Now Banning Photos Of People At Gun Ranges, Claiming They Promote "Violence"
  • 3 hours Ethanol, the Perfect Home Remedy for A Saudi Oil Fever
  • 1 day Saudis Buying Oil From Iraq
  • 6 hours Trump Accidentally Discusses Technology Used In The Border Wall
  • 16 hours Hong Kong protesters appeal to Trump for support.
  • 4 hours Famous Manufacturer of Anti-Ethanol Additives Proves Ethanol's Safety and Benefits
  • 9 hours Collateral Damage: Saudi Disruption Leaves Canada's Biggest Refinery Vulnerable
  • 1 day Donald Trump Proposes Harnessing Liberal Tears To Provide Clean Energy
  • 1 day Saudis Confirm a Cruise Missile from Iranian Origin
Alt Text

What The Market Is Overlooking In The Occidental Deal

Occidental Petroleum has caught a…

Alt Text

How To Play A Recovery In Oil Prices?

A realistic correction in the…

Alt Text

This Supermajor Is Leading The Energy Sector

This supermajor has been standing…

Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

More Info

Premium Content

The Derivatives Loch Ness

Something unusual is happening in the global swaps markets.

We expected this for the U.S. New rules requiring central clearing of formerly OTC-traded derivatives for big traders came into effect June 10. This includes interest rate and credit default swaps.

The numbers already show the effects of the regulations. CME Group said yesterday their clearing of interest rate swaps jumped 64% in June month-on-month, to $66 billion.

Here’s the unexpected part. The surge in derivatives trading also seems to be reverberating around the world.

In Singapore, daily average volumes in derivatives trading hit a new monthly record in June. Up 77% from June 2012.

Same in India, where exchanges also set a June record for value of derivatives traded.

These happenings remind me of those photos of the supposed Loch Ness monster. You only see a small part of the creature–a head, a fin, some scales–emerging from the water. Never the whole beast, which always stays hidden beneath the murky lake.

Increased global derivatives trading could be a “Loch Ness”. A sign of something bigger happening below the surface of global finance. Remember, the new trading rules for swaps are aimed at regulating a market worth $515 trillion globally. When you poke a monster that size, there’s a lot that could go wrong.

Of course the recent uptick in trading could also be simply a result of recent market volatility. But there are other “Loch Ness” photos emerging that suggest otherwise.

UK banks have been raising their fixed mortgage rates this week. The reason? One lending official attributed the rise to “on going increases to swap rates”, which banks use to hedge their exposure to interest rates.

The same thing is happening in the U.S. The 30-year fixed mortgage is up nearly 1% over the last two months. The largest increase in years.

Might new trading rules on swaps be affecting prices for these instruments? Increasing costs for swaps users like banks, who are passing the increase along to mortgage consumers?

There a lot of flippers and scales starting to poke out of Loch Swaps. Keep your cameras ready.

Here’s to spotting the monster before it eats you,

By. Dave Forest




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play