ICE Benchmark Administration Limited (IBA) has developed a suite of forward-looking, term risk-free-rates to help market participant manage benchmark transition. IBA’s ICE Term Reference Rates (ICE TRR) are designed to measure, on a daily basis, expected (i.e. forward-looking) risk-free-rates over 1-, 3-, 6-, and 12- month tenor periods, and are based on a Waterfall Methodology using eligible data for specified interest rate derivative products referencing the relevant risk-free-rate.
ICE TRR benchmark settings are available under licence from IBA (including for valuation and pricing activities and for use in transactions). Prospective licensees should contact IBA’s licensing team at [email protected] for information on how to obtain a usage licence from IBA.
Please review ICE Benchmark Administration’s benchmark and other information notice and disclaimer.
The use of term risk free rate settings for particular currencies may be subject to best practice recommendations from regulatory authorities or designated working groups in respect of those currencies. Please ensure you review such recommendations and take appropriate advice in relation to your use of term risk free rate settings.
ICE TSRR were launched on 11 January 2021 for use as a benchmark in financial instruments by licensees. This followed the conclusion of an initial testing period 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 rates over 1-, 3-, 6- and 12- month tenor periods. The rates are based on a Waterfall Methodology using eligible data for specified SONIA-linked interest rate derivative products. Further details on the Methodology are provided below.
ICE Term SOFR Reference Rates (“ICE Term SOFR”) were launched on 16 March 2022 for use as a benchmark in financial instruments by licensees. This followed the conclusion of an initial testing period during which IBA made available an initial, Beta version of ICE Term SOFR for information and testing purposes.
The ICE Term SOFR rates are designed to measure, on a daily basis, expected (i.e. forward-looking) SOFR rates over 1-, 3-, 6- and 12- month tenor periods. The rates are based on a Waterfall Methodology using eligible data for specified SOFR-linked interest rate derivative products. Further details on the Methodology are provided below.
At present, ICE Term SOFR settings are expected to be calculated using input data at the second or third level of the Waterfall (i.e. eligible dealer-to-client prices and volumes for eligible SOFR-linked interest rate swaps displayed electronically by trading venues where available, and otherwise futures settlement prices in respect of designated contracts referencing SOFR, published on an electronic trading venue). IBA expects to use Level 1 input data (i.e. eligible, executable prices and volumes for eligible SOFR-linked interest rate swaps, provided by regulated, electronic, trading venues) to derive ICE Term SOFR when this is available in the future.
Each published ICE Term Reference Rate (each an ICE TRR) is calculated using eligible data for specified interest rate derivative products linked to the relevant risk-free-rate (SONIA for ICE TSRR and SOFR for ICE Term SOFR). These data are provided by trading venues in accordance with a Waterfall Methodology. The same calculation Methodology applies to both ICE TSRR and the ICE Term SOFR rates. The full description of the Methodology is available in the Documentation section below.
The first level of the Waterfall (“Level 1”) uses eligible, executable prices and volumes for eligible interest rate swaps linked to the relevant risk-free-rate, provided by regulated, electronic, trading venues to derive the applicable ICE TRR setting. If these trading venues do not provide sufficient eligible input data to calculate the applicable ICE TRR setting 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 interest rate swaps displayed electronically by trading venues to derive the applicable ICE TRR setting. If there is insufficient eligible input data to calculate the applicable ICE TRR setting in accordance with Level 2 of the Methodology, then the third level of the Waterfall (“Level 3”) uses the previous trading day’s futures’ settlement price in respect of contracts linked to the relevant risk-free-rate, published on an electronic trading venue, the published risk-free-rates, and scheduled rate change dates, to derive the applicable ICE TRR setting.
Where it is not possible to calculate an ICE TRR setting at Level 1, Level 2 or Level 3 of the Waterfall, the ICE Term Reference Rates Insufficient Data Policy would apply for that ICE TRR setting.
At present, ICE Term SOFR settings are expected to be calculated using input data at the second or third level of the Waterfall (i.e. eligible dealer-to-client prices and volumes for eligible SOFR-linked interest rate swaps displayed electronically by trading venues where available, and otherwise futures settlement prices in respect of designated contracts referencing SOFR, published on an electronic trading venue). IBA expects to use Level 1 input data (i.e. eligible, executable prices and volumes for eligible SOFR-linked interest rate swaps, provided by regulated, electronic, trading venues) to derive ICE Term SOFR when this is available in the future.
The Standard Market Sizes (SMS) in respect of the hypothetical trades required to be filled at Level 1 or Level 2 of the Waterfall for each ICE TRR are
Tenor | SMS (in millions) |
|---|---|
| 1 Month | 1,000 |
| 3 Months | 750 |
| 6 Months | 500 |
| 12 Months | 75 |
In respect of each ICE TRR 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 for each ICE TRR. Input data is provided by the relevant trading venues on an “as is” basis.
ICE TSRR | ICE Term SOFR | |
|---|---|---|
| 1 Month | SONIA compounded for One Month using standard market conventions, using an actual/365 day count | SOFR compounded for One Month using standard market conventions, using an actual/360 day count |
| 3 Months | SONIA compounded for Three Months using standard market conventions, using an actual/365 day count | SOFR compounded for Three Months using standard market conventions, using an actual/360 day count |
| 6 Months | SONIA compounded for Six Months using standard market conventions, an actual/365 day count | SOFR compounded for Six Months using standard market conventions, using an actual/360 day count |
| 12 Months | SONIA compounded for Twelve Months using standard market conventions, an actual/365 day count | SOFR compounded for Twelve Months using standard market conventions, using an actual/360 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:
If you operate a suitable trading venue, or would like to suggest one for consideration, please email [email protected].
The ICE Swap Rate & Term Reference Rates Oversight Committee is comprised of an independent Chairperson and market representatives. The Oversight Committee is responsible for monitoring the administration of the ICE TRR benchmarks, including:
Oversight Committee Terms of Reference
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.
IBA has created the ICE Risk Free Rates (RFR) Calculator, which is designed to be a comprehensive risk free rates data source for market participants. The ICE RFR Portal includes risk free rates data, the ICE Risk Free Rates (RFR) Calculator and information on the ICE Term Rates and ICE RFR Indexes. The data provided on the ICE RFR Portal is provided for information purposes only and may not be used as a benchmark in financial instruments.
Disclaimer
IBA reserves all rights in the ICE TRR methodologies and in the ICE TRR settings. ICE and ICE Benchmark Administration are trademarks of IBA and/or its affiliates. The "SONIA" mark is used under license 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 trademarks of the Bank of England. IBA is not affiliated with the New York Fed. The New York Fed does not sanction, endorse, or recommend any products or services offered by IBA.