Refinitiv set to launch Term SONIA benchmark as end of LIBOR approaches

The Refinitiv Term SONIA benchmark supports market participants including lenders and borrowers with their migration away from GBP LIBOR.

Today Refinitiv announced its plan to launch the Refinitiv Term SONIA benchmark on January 11, 2021. This follows the previous announcement in July 2020 that Refinitiv would launch the prototype version of the same rate.

The London InterBank Offered Rate (LIBOR) underpins hundreds of trillions of dollars of financial instruments and contracts, making it one of the most widely used benchmarks in the world.

Following announcements by the Financial Conduct Authority (FCA) the industry anticipates the cessation of LIBOR in the foreseeable future.

The Refinitiv Term SONIA benchmark supports market participants including lenders and borrowers with their migration away from GBP LIBOR.

Refinitiv Term SONIA rate leverages the firm’s extensive experience in administering benchmarks by creating a British Pound Sterling (GBP) forward-looking term risk-free rate available in one-month, three-month, six-month and twelve-month tenors that is published daily at 11:50 London time. A waterfall methodology ensures the rate is robust and can be published in almost all circumstances. The primary data source is executable bids and offers from 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 rate also has an integrated fallback that applies the change in compounded SONIA in advance to the previous day’s rate.

Following the release of the Refinitiv Term SONIA prototype in July 2020 Refinitiv has worked closely with the industry to facilitate testing and refine the methodology.

Since July the prototype rate has been viewed over 20,000 times by over 600 users on Refinitiv Eikon and 200 users have accessed the rate via the dedicated website. In September Refinitiv issued a Consultation Paper and following this minor enhancements were made.

Jacob Rank-Broadley, Head of LIBOR Transition, Benchmarks & Indices at Refinitiv said: “Following extensive engagement with the industry and a positive reception from potential users testing the prototype we are pleased to announce the launch of our regulatory compliant Refinitiv Term SONIA benchmark and its migration to RBSL on January 11, 2021. We hope this will support those markets requiring a term rate and ensure a smooth transition away from GBP LIBOR.”

From January 11, 2021 Refinitiv Term SONIA will be administered by Refinitiv Benchmark Services (UK) Limited (RBSL), a wholly owned subsidiary of Refinitiv, in compliance with UK Benchmarks Regulation.

From this date licensed clients will be able to use the benchmark as a reference rate in financial instruments and financial contracts, and for valuation and pricing activities.

Sang Lee, Managing Partner at Aite Group, said: “As the financial industry approaches the unknown challenges and opportunities of 2021, launching a Term SONIA Reference Rate on January 11 serves as an essential and credible tool to facilitate transition away from LIBOR. More than ever the industry will require a robust and transparent rate that is administered by an experienced provider and subject to the highest regulatory standards, so markets can continue to function and grow even during periods of great uncertainty and stress.”

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