ICE Benchmark Administration Limited (IBA) launched its ICE Term SONIA1 Reference Rates (“ICE TSRR”) on 11 January 2021 for use as a benchmark in financial instruments by licensees. This follows the conclusion of an initial testing period which started on 25 June 2020, during which IBA made available an initial beta version of the ICE TSRR for information and testing purposes.
The ICE TSRR are designed to measure, on a daily basis, expected (i.e. forward-looking) SONIA rates1 over one month, three month, six month and 12 month tenor periods, and are based on a Waterfall methodology using eligible prices and volumes for specified SONIA-linked interest rate derivative products.
Each published ICE Term SONIA Reference Rate (each an “ICE TSRR Rate“) is calculated using eligible prices and volumes for specified SONIA-linked interest rate derivative products, provided by trading venues in accordance with a "Waterfall" Methodology.
The first level of the Waterfall (“Level 1”) uses eligible, executable prices and volumes for eligible SONIA-linked interest rate swaps provided by regulated, electronic, trading venues to derive the ICE TSRR Rate. If these trading venues do not provide sufficient eligible input data to calculate an ICE TSRR Rate in accordance with Level 1 of the Methodology, then the second level of the Waterfall (“Level 2”) uses eligible dealer to client prices and volumes for eligible SONIA-linked interest rate swaps displayed electronically by trading venues to derive the ICE TSRR Rate. If there is insufficient eligible input data to calculate an ICE TSRR Rate in accordance with Level 2 of the Methodology, then the third level of the Waterfall (“Level 3”) uses the previous trading day’s SONIA-linked futures’ settlement price, published on an electronic trading venue, SONIA rates published by the Bank of England, and scheduled MPC meeting dates, to derive the ICE TSRR Rate.
Where it is not possible to calculate an ICE TSRR Rate at Level 1, Level 2 or Level 3 of the Waterfall, then the TSRR Insufficient Data Policy would apply for that ICE TSRR Rate.
Standard Market Sizes
The Standard Market Sizes (SMS) in respect of the hypothetical trades that are required to be filled at Level 1 or Level 2 of the waterfall for each tenor are specified in the below table (numbers in millions):
Input Data Specifications and Criteria
In respect of each ICE Term SONIA Reference Rate benchmark run and tenor:
At Level 1 and Level 2, the bid and offer prices are for the fixed leg percentage rate for cleared interest rate swaps (together with the associated volumes) satisfying the requirements in the below table in respect of the applicable tenors. Input data is provided by the relevant trading venues on an “as is” basis.
|Tenor||Interest Rate Swap Specification|
|Fixed Leg Basis||Floating Leg Basis|
|One Month||Actual/365 day count||SONIA compounded for One Month using standard market conventions, using an actual/365 day count|
|Three Months||Actual/365 day count||SONIA compounded for Three Months using standard market conventions, using an actual/365 day count|
|Six Months||Actual/365 day count||SONIA compounded for Six Months using standard market conventions, using an actual/365 day count|
|Twelve Months||Actual/365 day count||SONIA compounded for Twelve Months using standard market conventions, using an actual/365 day count|
IBA sources input data for use at Level 1 of the Waterfall from the following regulated, electronic trading venues:
IBA sources input data for use at Level 2 of the Waterfall from the following electronic trading venue:
IBA sources input data for use at Level 3 of the Waterfall from the following electronic trading venue:
IBA is responsible for ensuring that there is appropriate governance over ICE Term SONIA Reference Rates, and that the appropriate standards of conduct are met.
The ICE Swap Rate & Term SONIA Reference Rates Oversight Committee is comprised of an independent Chairperson and market representatives. The Oversight Committee is responsible for monitoring the administration of the benchmark, including:
Further details on IBA’s general governance structure, including IBA’s independent Board of Directors, whistleblowing policy and other policies are available on IBA’s Governance page.
ICE TSRR are made available under licence from IBA pursuant to its Master Licence Agreement. The fees payable in respect of an ICE Term SONIA Reference Rates usage licence are being waived until 2022. IBA will notify licensees in advance when licence fees will become applicable (and will publish the applicable fee information on its website). Prospective licensees should contact IBA’s licensing team for further information.
ICE Term SONIA Reference Rates publication is at or around 11:55 am on applicable London business days
ICE Benchmark Administration Limited (IBA) has created the ICE Term Risk Free Rates (RFR) Portal which is designed to be a comprehensive RFR data source for market participants.
The RFR Portal includes the ICE Risk Free Rates (RFR) Calculator, published and realised average RFR data for SOFR, SONIA, TONA and €STR, and the ICE Term SONIA Reference Rates.
The data provided on the ICE Term RFR Portal is provided for information purposes only and may not be used as a benchmark in financial instruments.
1. SONIA is the Sterling Overnight Index Average rate administered and published by the Bank of England
The "SONIA" mark is used under licence from the Bank of England (the benchmark administrator of SONIA), and the use of such mark does not imply or express any approval or endorsement by the Bank of England. "Bank of England" and "SONIA" are registered trade marks of the Bank of England.