Refinitiv introduces Term SONIA Reference Rate prototype

Maria Nikolova

Term SONIA aims to support market participants with their migration away from GBP LIBOR.

Provider of financial markets data and infrastructure Refinitiv today announced the launch of a prototype Term SONIA (Sterling Overnight Index Average) Reference Rate. The Refinitiv Term SONIA will leverage the firm’s experience in administering benchmarks to create a British Pound Sterling (GBP) forward-looking term risk-free rate that is published daily prior to noon. The rate will be available in one-month, three-month and six-month tenors.

Refinitiv notes that, after the end of 2021, the Financial Conduct Authority (FCA), which regulates the LIBOR benchmark administrator, will no longer compel banks to submit to LIBOR. The Refinitiv Term SONIA can support market participants including lenders and borrowers with their migration away from GBP LIBOR.

Refinitiv has adopted a waterfall methodology to ensure a robust rate is published in almost all circumstances. The primary source of data is executable bids and offers from TP ICAP’s i-Swap and Tradition’s Trad-X electronic platforms. Refinitiv calculates a mid-price based on clearing a predetermined notional amount. The secondary source of data is streaming bids and offers from Tradeweb’s institutional electronic swaps platform. The rate also has an integrated fallback that applies the change in compounded SONIA in advance to the previous day’s rate.

Firms are able to immediately commence evaluation of the behaviour and suitability of the prototype as well as test technical integration. It is accessible free of charge on Refinitiv Workspace, Eikon, DataScope and via the Refinitiv website.

Refinitiv expect to launch a regulated version of the rate towards the end of 2020 when lenders are expected to offer non-LIBOR linked products to their customers.

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