RFR Adoption Continues to Grow
Posted by Colin Lambert. Last updated: January 13, 2022
The adoption of risk-free rates (RFR) continued apace in December according to the ISDA-Clarus RFR Adoption Indicator, which rose to a new all-time high of 31.7% in December compared to 26.3% the prior month.
The indicator tracks how much global trading activity (as measured by DV01) is conducted in cleared over-the-counter and exchange-traded interest rate derivatives (IRD) that reference the identified risk-free rates (RFRs) in six major currencies.
On a traded notional basis, the percentage of RFR-linked IRD comprised 20.8% of total IRD in December compared to 17.7% the prior month. RFR-linked IRD DV01 decreased to $8.5 billion from $9.0 billion the prior month, while total IRD DV01 transacted decreased to $26.7 billion from $34.4 billion the prior month and RFR-linked IRD traded notional decreased to $25.2 trillion from $29.7 trillion.
Total IRD traded notional transacted decreased to $121.1 trillion from $168.0 trillion in November, while the percentage of trading activity in SOFR reached 25.3% of total USD IRD DV01 transacted, compared to 19.2% the prior month.
Japanese yen saw the largest percentage of RFR-linked IRD trading activity, totalling 88.5% of total JPY IRD DV01, it also had the highest percentage of RFR-linked IRD DV01 executed as transactions with tenors longer than two years.