Refinitiv Introduces Alternative Benchmark to Soon-Defunct Libor

Financial data vendor Refinitiv has launched a prototype version of its Term SONIA (Sterling Overnight Index Average) Reference Rate, which was designed to measure average SONIA rates over one month, three month and six month tenor periods on a daily basis.

The beta version will remain available for testing purposes until the end of 2020 before Refinitiv launches a regulated benchmark just when banks begin to offer non-LIBOR linked products. Until then, the new reference rates will remain accessible free of charge on Refinitiv Workspace, Eikon, DataScope, and via its website.

Refinitiv said it had adopted a waterfall methodology to calculate the reference rates using executable bid and offer prices and volumes for eligible SONIA-linked overnight Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term on the central limit order books of TP ICAP’s i-Swap and Tradition’s Trad-X electronic platforms. The secondary source of data is streaming bids and offers from Tradeweb’s institutional electronic swaps platform.

The news comes as the scandal-ridden Libor Libor Libor stands for London Inter-bank offered rate. It is an industry-specific term which most of us would never have heard of until the "Libor scandal" became popularized in 2012. Libor is considered to be one of the most important interest rates in finance, upon which trillions of financial contracts rest. The Libor rate effects over $800,000,000,000,000 in financial deals. Banks simply cannot lend money to one another whenever they like as there is a system in place. Every day a group of leading Libor stands for London Inter-bank offered rate. It is an industry-specific term which most of us would never have heard of until the "Libor scandal" became popularized in 2012. Libor is considered to be one of the most important interest rates in finance, upon which trillions of financial contracts rest. The Libor rate effects over $800,000,000,000,000 in financial deals. Banks simply cannot lend money to one another whenever they like as there is a system in place. Every day a group of leading Read this Term is set to retire at the end of 2021 as the world’s most important benchmark following a multiyear rigging scandal by major lender since the 2008 financial crisis.

They were also a dozen bankers that have been convicted on Euribor rate-rigging charges in Britain in a series of prosecutions brought by the Serious Fraud Office, which ultimately prompted an overhaul of the UK’s rate-setting rules. Prosecutors alleged that bank traders dishonestly manipulated the rate to benefit their own trading positions, nudging them up or down while ignoring rules that they should be set independently.

LIBOR, which underpins more than $300 trillion in derivatives and other instruments, is set to be replaced with the Bank of England’s Sonia rate for sterling-denominated swaps, loans, and futures.

UK regulators urged market participants earlier this year to accelerate the shift to the Sonia overnight rate before it ceases issuance of cash products referencing Libor by the third quarter.

Shirley Barrow, Global Head Benchmarks & Indices, Refinitiv, said: “As the global financial markets migrate away from LIBOR, the need for accurate, robust and trusted alternative rates becomes ever more important. As a regulated benchmark administrator and provider of key benchmark rates, Refinitiv is delighted to use our many years of experience to create the Term SONIA Reference Rate prototype to support the industry.”