RFR Adoption Resumes Uptrend
Posted by Colin Lambert. Last updated: November 12, 2022
After a brief hiatus when adoption flattened out in September, the adoption rate of Risk-Free Rates (RFRs) moved higher again in October according to the ISDA-Clarus Adoption Indicator, which hit 51.3% from 51.1% the previous month.
The indicator 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 RFRs in six major currencies. On a traded notional basis, the percentage of RFR-linked IRD increased to 45.4% of total IRD transacted in October 2022 compared to 44.9% in September.
RFR-linked IRD DV01 declined to $15.7 billion from $19.2 billion in September, while total IRD DV01 decreased to $30.7 billion from $37.7 billion. RFR-linked IRD traded notional declined to $79.7 trillion from $102.2 trillion, and total IRD traded notional decreased to $175.6 trillion compared to $227.8 trillion.
The percentage of trading activity in SOFR increased to an all-time high of 58.1% of total USD IRD DV01 in October 2022 compared to 56.6% in September, while CHF saw the largest percentage of RFR-linked IRD trading activity, totalling 100% of total CHF IRD DV01. JPY had the highest percentage of RFR-linked IRD DV01 executed as transactions with tenors longer than two years.
