ICE launches beta version of SONIA reference rates

ICE Benchmark Administration has started publishing beta term SONIA rates for testing, using data from BGC, TP ICAP, and Tradition’s Trad-X central limit order books.

US exchange group ICE has launched a beta version of its term SONIA reference rates for testing purposes before it is made available as a benchmark for interest rate derivatives.  

ICE Benchmark Administration has launched the initial beta version of the ICE term SONIA reference rates (ICE TSRR), which measure average expected SONIA rates over one month, three months, and six-month tenor periods on a daily basis.

Calculated via a waterfall methodology, ICE said the reference rates use tradeable bid and offer prices and volumes for eligible SONIA-linked overnight interest rate swaps on the central limit order books of BGC, TP ICAP and Tradition’s Trad-X. If the venues do not provide eligible input data for the first level of the waterfall calculation, the second level will use SONIA-linked futures data published on electronic venues.  

“We have heard feedback from many businesses, borrowers, and lenders, that they value having forward-looking term rates to provide certainty when calculating their interest expenses and other contractual payments in advance,” said Tim Bowler, president of ICE Benchmark Administration.

“ICE Benchmark Administration is working hard to provide tools to help the market transition to alternative rates and we will be ready to launch forward-looking term rates for other alternative overnight rates as market conditions allow.”

The exchange group is publishing beta rates for testing purposes in line with the UK working group on sterling risk-free reference rates (RFRWG). ICE will confirm in due course when the TSRR will be made available as a benchmark for financial instruments.

Authorities in the UK, including the RFRWG, urged market participants earlier this year to accelerate the shift to SONIA from the controversial Libor benchmark before it is axed at the end of 2021. Describing 2020 as a ‘critical’ year for Libor transition, the measures from the authorities requested participants to cease issuance of cash products referencing Libor by the third quarter this year.