FTSE Russell launches £SONET
- New secured reference rate for sterling overnight funds
- Reflects current sterling wholesale funding markets which are substantially based on secured lending
- Will provide a benchmark for the daily funding activities of sterling market participants
- Developed by FTSE Russell with the support of Euroclear and leading inter-dealer brokers
- Captures approximately two thirds of the overnight secured funding market; up to £99bn daily transaction volume
FTSE Russell is delighted to announce the launch of £SONET (Sterling Secured Overnight Executed Transactions) following an industry-wide initiative to create a new secured reference rate for sterling overnight funds, in response to the Financial Stability Board’s July 2014 recommendations on the reform of major interest rate benchmarks. £SONET has been developed by FTSE Russell and London Stock Exchange Group, in partnership with Euroclear and leading inter-dealer brokers.
£SONET includes cleared and uncleared repo activity, and captures approximately two thirds of the overnight gilt repo market, representing up to £99 billion of daily transaction volume.
The sterling wholesale funding market is substantially based on secured lending activity. As a nearly risk free secured index £SONET reflects this market and is distinct from legacy unsecured benchmarks. £SONET can be used as a benchmark for the daily funding activities of sterling market participants; to underpin the discounting of long term sterling cash flows; and as a reference rate for derivatives and other contracts.
The rate is currently being published* in indicative form to allow prospective users to evaluate and provide feedback. FTSE Russell intends to move £SONET to a definitive basis later in 2017. Definitive £SONET will be administered in line with the forthcoming European regulation on indices used as benchmarks in financial instruments and with the IOSCO Principles for Financial Benchmarks.
£SONET reflects LSEG’s long held open access principles. In addition to assisting with the creation and refinement of £SONET, Euroclear will provide aggregated uncleared DBV repo transactions. Leading inter-dealer brokers will provide cleared repo transactions from a growing portion of the marketplace. £SONET is based on a transparent and publicly available methodology* overseen by an independent advisory committee of market participants from both the buy-side and the sell-side.
Mark Makepeace, CEO of FTSE Russell, said:
“We are delighted to be able to announce the launch of £SONET from FTSE Russell, a new secured reference rate for sterling overnight funds. We have taken care to work closely with our partners, such as Euroclear, as well as industry participants from the buy- and sell-side community to develop a robust, impartial and credible rate, which can be used as a benchmark for the markets daily funding activities.”
Adrian Pogson, Head of Solutions Management at Insight Investment, said:
“As a significant participant in the sterling repo market and user of derivatives we welcome the introduction of £SONET, which will provide a number of benefits to market participants. Being based on secured transactions, £SONET will capture a significant portion of the most relevant funding market. In addition, FTSE Russell’s Methodology and Governance will enable £SONET to remain relevant in the future as the secured sterling funding markets develop and expand.”
Disclaimer: Indicative £SONET is not intended for or to be relied on or otherwise used for the purposes of any valuation, pricing, or financial products; and FTSE Russell makes no warranty as to the underlying data or methodology or the rate being fit for any purpose, or the rate continuing to be published or published regularly. FTSE Russell does not make any representation or warranty, express or implied, as to the accuracy, completeness or correctness of Indicative £SONET, and does not accept any liability for any loss or damage, howsoever caused, arising from any reliance on Indicative £SONET.
For further information:
Lucie Holloway +44 (0)20 7797 1222
Hong Kong: Fennie Wong +852 2164 3267
Sydney: Laura McCrackle +61 2 8823 3526
Notes to editors:
About FTSE Russell:
FTSE Russell is a leading global index provider creating and managing a wide range of indexes, data and analytic solutions to meet client needs across asset classes, style and strategies. Covering 98% of the investable market, FTSE Russell indexes offer a true picture of global markets, combined with the specialist knowledge gained from developing local benchmarks around the world.
FTSE Russell index expertise and products are used extensively by institutional and retail investors globally. More than $10 trillion is currently benchmarked to FTSE Russell indexes. For over 30 years, leading asset owners, asset managers, ETF providers and investment banks have chosen FTSE Russell indexes to benchmark their investment performance and create investment funds, ETFs, structured products and index-based derivatives. FTSE Russell indexes also provide clients with tools for asset allocation, investment strategy analysis and risk management.
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For more information, visit www.ftserussell.com
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