ICE Launches GBP Sonia Spread-Adjusted Swap Rate Settings

As the UK pushes ahead with its plans to have markets switch from Libor to Sonia, ICE Benchmark Administration (IBA) has launched GBP Sonia Spread-Adjusted ICE Swap Rate ‘Beta’ settings.

IBA is publishing daily, indicative ‘Beta’ settings for an initial testing period. It says the settings are designed to support the market in transitioning non-linear derivatives, structured products and cash market instruments that currently reference GBP Libor ICE Swap Rate.

The new ‘Beta’ settings are available alongside GBP Sonia ICE Swap Rate and are published for tenors ranging from one to 30 years and are determined in line with the methodology proposed by the Working Group on Sterling Risk-Free Reference Rates in its paper Transition in Sterling Non-Linear Derivatives referencing GBP LIBOR ICE Swap Rate.

“We believe that spread adjusted GBP Sonia ICE Swap Rate will be essential in helping the non-linear derivative market transition,” says Bob Goodfellow, head of GBP rates and inflation options at NatWest Markets. “In combination with GBP Sonia ICE Swap Rate, we now have the building blocks needed to help this transition whilst helping address legacy contracts which reference GBP Libor ICE Swap Rate.”

Tim Bowler, president of ICE Benchmark Administration, adds, “IBA continues to engage closely with the market on the transition from GBP Libor ICE Swap Rate to GBP Sonia ICE Swap Rate. Through the launch of spread-adjusted GBP Sonia ‘beta’ settings, in addition to publishing GBP Sonia ICE Swap Rate as a benchmark since December 2020, IBA is providing the tools and solutions the non-linear derivatives market needs to effectively plan and implement this transition”.

IBA stresses it is publishing the ‘Beta’ settings for information and illustration purposes in order to enable stakeholders to evaluate the rates and provide feedback. The settings are not intended for, and IBA says it expressly prohibits their use for, any other purpose, including as a reference, index or benchmark in financial instruments, financial contracts, or investment funds. The firm will announce in due course when the new settings will be made available for use in financial instruments.