Derivatives industry least prepared for futures and options Libor transition, study finds 

An Acuti report has found that 52% of respondents were ready for the Libor transition in listed derivatives, the lowest result of all instruments.

Derivatives participants are least prepared for the transition in futures and options as the UK market approaches the cessation date for Libor, a report by Acuti has found.

The study by Acuti and LSEG’s CurveGlobal surveyed 114 executives across the derivatives market, finding that 52% were prepared for the Libor transition in listed derivatives, the lowest response of all financial instruments. 

The UK’s Financial Conduct Authority confirmed in March that the cessation date for Libor would be 31 December, however, an SDL report in March later found that over half of sell-side firms had had their Libor transition delayed by the ongoing COVID-19 pandemic. 

Acuti’s survey also found that just 15% of participants said over half of their daily listed trading volume is referenced to SONIA with a similar percentage stating the same for open interest. Half of the respondents surveyed said that less than 10% of their listed open interest was referencing SONIA. 

In comparison, three quarters of respondents said that more than half of their daily swaps volume references the SONIA benchmark with around a third of respondents stating that more than half of their total swaps exposure references the new rate.

“It had been assumed that listed instruments would be one of the simplest areas to transition to SONIA. However, both liquidity in SONIA futures and options and the levels of preparedness identified in our study, point to a very busy six months for the industry,” said Will Mitting, managing director and founder of Acuiti.

The report also found that participants were increasingly concerned about the impact of the transition on their business with the percentage of those surveyed who thought the transition would be “highly disruptive” rising from 13% to 22% since October last year.

These fears are concentrated to banks and proprietary trading firms, with asset managers far less likely to view the transition as disruptive.