RFR Adoption Hits New High
Posted by Colin Lambert. Last updated: January 12, 2023
The ISDA-Clarus RFR Adoption Indicator increased to 54.3% in December 2022, a new high for the indicator, which tracks how much global trading activity (as measured by DV01) is conducted in cleared OTC and exchange-traded interest rate derivatives (IRD) that reference the identified risk-free rates (RFRs) in six major currencies.
This is a leap from what was a re-stated 50.8% in November – on a traded notional basis, the percentage of RFR-linked IRD increased to 50.1% of total IRD transacted in December 2022 compared to 47.9% in November.
RFR-linked IRD DV01 declined to $14.4 billion from $15.9 billion in November, while, total IRD DV01 decreased to $26.5 billion from $31.4 billion. RFR-linked IRD traded notional declined to $73.6 trillion from $87.8 trillion, and total IRD traded notional decreased to $147.0 trillion compared to $183.5 trillion.
The percentage of trading activity in SOFR increased to yet another all-time high of 64.1% of total USD IRD DV01 in December 2022 compared to 58.3% in November. CHF, GBP and JPY accounted for 100% of total CHF IRD DV01, 99.5% of total GBP IRD DV01 and 97.8% of total JPY IRD DV01, respectively, while JPY had the highest percentage of RFR-linked IRD DV01 executed as transactions with tenors longer than two years.