Intercontinental Exchange (ICE) has taken
over the administration of the ISDAFIX benchmark, a key rate for the pricing
and settlement of swaps.
The new administrator hopes to eventually
use a more reliable market-based calculation for the rate to increase
confidence in the benchmark.
ICE Benchmark Administration (IBA), which
was initially set up to take over the administration of Libor from the British
Bankers Association after the rate setting scandal, was appointed to administer
the rate in April. It had formerly been managed by the International Swaps and
Derivatives Association (ISDA).
ISDAFIX represents the average mid-market
swap rate in four major currencies, the British Pound, euro, Swiss franc and US
dollar, at selected maturities on a daily basis.
It is used by market participants to price
and settle swaps and as a reference rate for floating rate bonds.
Initially, the rate will be calculated
using the existing polled submission model, where banks submit mid-point prices
to IBA. However, ICE plans to transition to a market-based methodology based on
With interest rate swap transactions moving
to electronic markets as a result of reforms such as the Dodd-Frank Act in the
US and European market infrastructure regulation, it will be possible for IBA
to use electronic trading data to provide a more accurate and reliable
benchmark for ISDAFIX.
Finbarr Hutcheson, president of IBA, said,
“We look forward to working with market participants to evolve ISDAFIX from a
polled rate to one based on tradable quotes on regulated trading venues. IBA is
committed to providing independent and neutral administration services, in line
with regulatory requirements, to systemically important financial market