ICE Term SONIA Reference Rates

Overview

ICE Benchmark Administration Limited (IBA) launched its ICE Term SONIA 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.

Please read ICE Benchmark Administration’s (IBA) benchmark and other information notice and disclaimer here

ICE Term SONIA Reference Rates (TSRR)

Benchmark Date Tenor TSRR 1100
20-Jan-2021 1 Month 0.0445
20-Jan-2021 3 Month 0.0364
20-Jan-2021 6 Month 0.0164
20-Jan-2021 12 Month -0.0263

Methodology

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.

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.

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):

Tenor SMS
1 Month 250
3 Months 250
6 Months 250
12 Months 75

Input Data Specifications and Criteria

In respect of each ICE Term SONIA Reference Rate benchmark run and tenor:

  • At Level 1 of the Waterfall, tradeable bid and offer prices and volumes available on the central limit order books of regulated, electronic trading venues in respect of a two-hour window before the relevant calculation are used to calculate the ICE Term SONIA Reference Rates.
  • At Level 2 of the Waterfall, dealer to client bid and offer prices and volumes displayed electronically by trading venues in respect of the same two-hour window are used to calculate the ICE Term SONIA Reference Rates.
  • At Level 3 of the Waterfall, previous trading day’s SONIA-linked futures’ settlement prices, SONIA rates published by the Bank of England, and scheduled MPC meeting dates, to derive the ICE Term SONIA Reference Rates.

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

Data Providers

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:

Governance

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:

  • Regular reviews of the definition, methodology and setting of the benchmark
  • Assessing the underlying market and usage of the benchmark
  • Overseeing adherence to the calculation methodology and IBA policies
  • Approving the addition or withdrawal of currencies and tenors for the benchmark

Oversight Committee Composition and Disclosures of Conflicts of Interest

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.

Documentation

Licensing

ICE Term SONIA Reference Rate will be made available under licence from IBA pursuant to a new Schedule to its Master Licence Agreement. Prospective licensees should contact IBA’s licensing team for further information. The ICE TSRR will be made available to licensees at no cost for an initial period. IBA will notify licensees in advance when licence fees will become applicable (and will publish the applicable fee information on its website).

Publication Days and Holiday Schedules

The ICE Term Risk Free Rates (RFR) Holiday Calendar is provided here.

RFR Portal

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.

Publications

IBA Term Risk Free Rates Paper - October 2018

IBA Presentation to the GBP RFR Working Group - May 2019

IBA Term €STR presentation to the Euro RFR Working Group - October 2019


Disclaimers

None of ICE Benchmark Administration Limited (IBA), ICE, or any of its or their affiliates, or any third party that provides input data to IBA to calculate or determine the data on the ICE Term RFR Portal, accepts any responsibility or liability arising out of on in connection with the data herein or any use that you may make of it and, all implied terms, conditions and warranties and liabilities in relation to the data and its publication on the ICE Term RFR Portal are hereby excluded to the fullest extent permitted by law. "ICE" is a trademark of ICE and/or its affiliates.


1. SONIA is the Sterling Overnight Index Average rate administered and published by the Bank of England