ICE Transitions Sterling and Euroswiss LIBOR-based Derivatives to SONIA and SARON

Intercontinental Exchange, Inc. (ICE), a leading global provider of data, technology, and market infrastructure, has recently transitioned all open interest held in its LIBOR-based Three Month Sterling futures and options and Three Month Euro Swiss Franc (Euroswiss) futures into their risk free rate (RFR) equivalent contracts, Three Month SONIA Index futures and options and Three Month SARON Index futures.

The transition completes ICE’s LIBOR cessation process for these contracts and ICE SONIA is now the benchmark contract for managing U.K. short term interest rate risk, according to Steve Hamilton, Global Head of Financial Derivatives at ICE. “Through continued innovation over the past few years and by closely supporting our customers through their transition to new alternative rate markets, ICE offers its customers the greatest liquidity to manage U.K. and Swiss interest rate risk as part of a broad multi-currency rate product suite,” he added.

ICE converted LIBOR-referenced contracts into the notional equivalent number of RFR-referenced contracts, applying the relevant spread for fallbacks in ISDA documentation to the conversion. Two Three Month Sterling futures were converted into one Three Month SONIA Index future with the same delivery month, reflecting how one SONIA future is double the notional value of a Sterling future, while the conversion of Three Month Euroswiss positions to SARON was a straight one for one conversion.

Currently, a total of 3,512,101 Sterling contracts and 145,082 Euroswiss contracts were transitioned. Open interest in SONIA futures and options stands at 6,976,654 with open interest of 153,208 in SARON.

This March, the Financial Conduct Authority (FCA), the regulator of LIBOR, confirmed that immediately after 31 December 2021, all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings would either cease to be provided by any administrator or no longer be representative.

Shortly before, Fazzaco reported that ICE Benchmark Administration Limited (IBA)​ aimed to launch the GBP SONIA Spread-Adjusted ICE Swap Rate as a benchmark for licensees to use in financial contracts and financial instruments on January 4, 2022.