FX Markets and Risk.net have launched Counterparty Radar, a data service that scours the filings of US mutual funds to reveal the most popular dealers and active funds in credit, equities, foreign exchange and rates instruments.
The data is compiled using the quarterly positions that US mutual funds file with the Securities and Exchange Commission. While the data is publicly available, gathering and aggregating the data is not straightforward. Although the SEC’s filing template is standardized, the contents are not – different firms report the same information in very different ways, requiring careful cleaning, mapping and verification.
Importantly, the filings differ from the vast trove of information available in trade repositories. While the data isn’t real-time, the filings show which firms executed the trades and also who the counterparty was. This gives unique insight into the trading behavior and counterparty preferences – of some of the world’s biggest asset managers.
Close examination of the Counterparty Radar data has already revealed settlement clusters in the FX forwards market – hidden points of vulnerability. And that US funds dramatically ramped up their use of interest rate swaps in non-G10 currencies, presumably as part of their attempts to escape low-yielding bonds in developed markets. It clearly shows managers placing a big bet on the renminbi via foreign exchange options, and rebuilding their short credit default swap index positions after the panic and confusion of the first coronavirus lockdowns.
The service enables sell-side firms to get a head start in client prospecting, understanding which instruments the mutual funds are trading – and, more importantly, with whom.
“We were aware this data is out there, but for someone to have done the work to pull it all together – that’s super-useful. What you can do, that others can’t, is go directly to the dealers and check the data”
Head of e-FX trading at a large European dealer
For the funds themselves, it informs counterparty selection and potential concentration risk, while both the buy and sell sides can create their own peer comparisons.
“Everyone has a slightly different broker panel, different relationships with each of the brokers. But this is representative data. If I talk to one asset manager, I’ll get a partial view. If I speak to a second, I’ll get another partial view. This dataset is holistic”
Portfolio manager at a large asset manager
With the Counterparty Radar service now launched, plans are in place to broaden the datasets within it, and also introduce a new complementary service to Risk Quantum in 2022.