CME Group set to launch two new SONIA futures

Maria Nikolova

CME Group will launch two new SONIA futures: a quarterly International Monetary Market (IMM) dated contract and a Bank of England Monetary Policy Committee (MPC) meeting dated contract.

Open a bank account directly with a central bank

As the need to transition away from LIBOR gets more intense, so does the shift to other reference rates. There is nothing astonishing then that financial market participants are starting to roll out products related to these new rates. International derivatives marketplace CME Group Inc (NASDAQ:CME) has just unveiled its plans to launch Sterling Overnight Index Average (SONIA) futures on October 1, 2018, pending regulatory review.

CME Group will launch two new SONIA futures: a quarterly International Monetary Market (IMM) dated contract observing the recommended specifications of the Working Group on Sterling Risk Free Reference Rates; and a Bank of England Monetary Policy Committee (MPC) meeting dated contract. The MPC SONIA future is designed to meet the needs of market participants who require greater precision in managing exposure between the dates of the MPC meetings.

CME Group notes that it has been involved for several years in the global effort to incorporate alternative reference rates as risk management tools and launched the first transaction-based, US dollar interest rate SOFR futures in May 2018.

CME SONIA futures complement CME Group’s successful push into international fixed income markets through OTC Clearing.

Let’s recall that the overall objective of the Working Group on Sterling Risk-Free Reference Rates is to facilitate a broad-based transition from sterling Libor to SONIA by end-2021. The transition, of course, has its challenges. In July this year, Andrew Bailey, Chief Executive of the Financial Conduct Authority (FCA) stressed the need for market participants to be prepared for transitioning away from LIBOR. He made it clear that firms that the FCA supervises will need to be able to demonstrate to FCA supervisors and their PRA counterparts that they have plans in place to mitigate the risks, and to reduce dependencies on LIBOR.

In particular, some firms will also have obligations to disclose and consider risks to investors when they sell LIBOR-related instruments, he explained. Issuers of LIBOR-related listed securities, for instance, owe duties of disclosure under prospectus requirements, and must ensure these have been fulfilled. Banks and investment firms also need to consider the design and risks of any new LIBOR-referencing instruments as part of their product governance obligations, considering and describing the impact of LIBOR discontinuation on those instruments. And they will need to provide all appropriate information to all distributors of those financial instruments.

Read this next

Retail FX

Prop firm The Funded Trader shuts down, claims relaunch in April

Prop trading firm The Funded Trader has ceased all operations, with claims for a relaunch in the near future.

Digital Assets

Ethereum-Based Tokenized Real Estate Platform USP Launches On Republic

How This Californian Startup Is Revolutionizing Real Estate Investment through Ethereum-Based Tokenization.

Digital Assets

Sui Spikes in Weekly DEX Volume, Joins Top 10 of All Blockchains

March DEX volume on Sui stands at over $2.88B – up more than 49% from February – with decentralized exchange Cetus and wholesale liquidity layer DeepBook leading.

Digital Assets

Prisma Finance suffers $10 million crypto exploit, attack ongoing

Liquid staking protocol Prisma Finance fell victim to a security exploit on March 28, resulting in nearly $10 million in Prisma mkUSD and wrapped stETH being stolen by hackers.

Digital Assets

Masa and LayerZero: Bridging Blockchains for Data Sovereignty

Masa Network is poised to revolutionize the personal data landscape with its upcoming launch as a cross-chain platform, making it accessible on a variety of blockchains right from the start.

Digital Assets

Big Time Generates over $100M in Revenue since Preseason

Innovative game developer Big Time Studios announces that its highly anticipated free-to-play multiplayer action/MMO RPG Big Time, has generated $100M in revenue. According to the team, players transacted a total volume of over $230M, without selling a single token.

Digital Assets

Centralized exchanges are 10 times more popular than DEXs in Western Europe

Western European traders are found to prefer centralized exchanges over decentralized ones as CEX traffic outpaces DEXs by a factor of ten.

Market News

Stock Market Analysis: Is NVDA Losing Its Leadership?

Since the beginning of the week, the S&P 500 Index (US500) has seen a modest increase of about 0.58%, whereas NVDA’s share price has experienced a decline of approximately 3.8%. This recent divergence raises concerns among Nvidia stock investors — could it signify a loss of NVDA’s market leadership?

Industry News

ESG: Australian regulator wins first greenwashing court case against Vanguard

Vanguard admitted that a notable portion of the securities within both the Index and the Fund did not undergo the promised ESG scrutiny.

<