APRIL 14TH Eurodollar LIBOR to SOFR transition

[robcarver17]

Need to check if any issues. Might be a jump in adjusted price if not careful.

[robcarver17]

April 14th
https://www.cmegroup.com/articles/faqs/transitioning-from-eurodollar-futures-and-options-to-sofr-faq.html

[robcarver17]

Trading in eligible Eurodollar futures* will be terminated and all open positions will be converted on a 1:1 basis into same month CME Three-Month SOFR futures (SR3) contracts with a price adjustment of 26.161bp (the fixed ISDA Fallback Spread Adjustment for 3M USD LIBOR) to the latest Eurodollar (ED) futures daily settlement price.

[robcarver17]

SR3 futures Onset Price = 3-Month Eurodollar futures settlement price + 26.161 bps.

[robcarver17]

Pre-requisites: SOFR 3 months set up in system (I have this, instrument marked as 'SOFR')

No EDOLLAR positions: I currently have no EDOLLAR positions but in any case I'd mark it as close in the roll handler or interactive_controls/add zero position limit to ensure any existing positions were closed, and allow new ones to be opened.

Note that both EDOLLAR and SOFR are marked 'too safe to trade' (https://github.com/robcarver17/reports/blob/master/Remove_markets_report) as their vol is too low for safe leverage.

It then makes sense to backfill the SOFR prices with EDOLLAR prices plus 26.161 basis points.

Then remove EDOLLAR from any .yaml backtest and strategy configuration files, or probably better to zero instrument weights in case this causes issues.

Once the EDOLLAR prices are no longer updated, they will cause alerts in the monitor report.

As discussed before deleting the prices may cause unexpected issues, deleting position and trade data will cause things to go out of whack, and it will be better to find a way of flagging redundant/dead instruments that can be ignored for monitor purposes.

[tgibson11]

this will do all the other steps, so creates the contract data / a roll calendar / creates the multiple and adjusted prices?

Correction: it probably doesn't create a roll calendar. Roll calendars are a means to the end of generating multiple prices. Here we already have the EDOLLAR multiple prices that are just going to be copied. You could easily generate a roll calendar from the copied SOFR multiple prices, but not sure why you'd need that.

[rorymac]

Todd
Again fantastic, thank you for the info.
Will give it a go tomorrow.

[rorymac]

"The spread data script isn't really anything to do with the EDOLLAR-SOFR conversion. Not sure where you're getting that from."

From the current quick start guide under instrument configuration - it was a different script some time ago, that basically initialized the instrument in the system - that is in the mongo DB.

So I do not have SOFR set up in my system (that is configured) - that is when I look at contract prices (interactive_diagnostics) SOFR is not on the list of instruments.

BUT in doing the following : #107
and running this script - https://github.com/robcarver17/pysystemtrade/blob/develop/sysinit/transfer/positions_from_timed_storage_to_arctic.py
A new file was created sysbrokers/IB/ib_config_futures.csv
Which is the config - think I have mentally missed.... (the data architecture has changed a lot!)
And SOFR is there.
Thus I assume that I have SOFR set up (not in production for trading but "in the system", potentially to gather prices.)
Anyway again thanks, I am going to set up my back up server and give it a go.

[tgibson11]

Running that script didn't create the IB config file...that has been there for some time (years).

Anyway...since there is no more instrument or roll config stored in the database, you are correct that you should have all the instrument-level config for SOFR. You would still need to update your system config and maybe your bad_markets config, if that is appropriate.

[rorymac]

Well that is embarrassing, came up on git, so jumped to a conclusion.
BTW all upgraded and all looks operational.
Thanks again.

[robcarver17]

Replace historic SOFR prices with Eurodollar prices. Make sure that there are no positions or orders in eithier instrument when you do this and as always, run a backup or do on a test machine.

from sysinit.futures.clone_data_for_instrument import *
clone_data_for_instrument(instrument_from='EDOLLAR', instrument_to= 'SOFR', offset = 0.26161, ignore_duplication=True)

It's worth updating sampled contracts, updating contract prices and updating multiple adjusted prices to make sure there are no gotchas. In particular, when you update individual contract prices you will get a warning if there is a big difference between the backfilled price offset from EDOLLAR and the sampled SOFR price from IB.

IMPORTANT: If like me you're trading EDOLLAR out in 2026, you might find the SOFR liquidity there is somewhat limited. There will be quite a delay before SOFR needs rolling.

********************************************************************************
           Roll report report produced on 2023-03-24 11:55:55.861256            
********************************************************************************



==============================================================================================================================================
                                                       Status and time to roll in days                                                        
==============================================================================================================================================

       status  roll_expiry  price_expiry  carry_expiry contract_priced contract_fwd  position_priced  relative_volume_fwd  contract_volume_fwd
SOFR  No_Roll          452          1452          1361        20261200     20270300              0.0                 0.94                 6199

Roll_exp is days until preferred roll set by roll parameters. Prc_exp is days until price contract expires, Crry_exp is days until carry contract expires
Contract suffix: p=price, f=forward, c=carry
Contract volumes over recent days, normalised so largest volume is 1.0

********************************************************************************
                                 END OF REPORT                                  
********************************************************************************

[robcarver17]

Updates to private config:

stale_instruments: ['RAPESEED', 'EDOLLAR']
exclude_instrument_lists:
  # ignore_instruments are ignored in backtests
  # we still collect price data for them in production, do rolls etc
  # If something is *STALE* you will have to manually add it here
  ignore_instruments: # this will only affect future sim backtesting when building new strategies, it won't delete from an existing strategy .yaml you have to do that manually
    - ['BRENT', 'RAPESEED', 'EDOLLAR']

Note once in 'stale' we no longer collect prices!