The ICE Swap Rate® (formerly known as ISDAFIX) is recognised as the principal global benchmark for swap rates and spreads for interest rate swaps. ICE Swap Rate is used as the exercise value for cash-settled swaptions, for close-out payments on early terminations of interest rate swaps, for some floating rate bonds and for valuing portfolios of interest rate swaps.
The ICE Swap Rate represents the mid-price for interest rate swaps (the fixed leg) and swap spreads (the applicable mid-price minus a corresponding specified government bond yield), in various specified currencies and tenors and at particular specified times of the day.
IBA has published a Statement of Compliance with the EU Benchmarks Regulation and Benchmark methodologies, including in respect of ICE Swap Rate, and Ernst & Young LLP has externally reviewed and provided assurance in respect of this Statement. Please note that, from April 27, 2018 to December 31, 2020, IBA was authorized as a benchmark administrator under the EU Benchmarks Regulation (the “EU BMR”). Following the conclusion of the transition period in relation to the withdrawal of the UK from the EU, commonly referred to as “Brexit”, which ended at 11:00 pm on December 31, 2020, IBA ceased to be authorised as a benchmark administrator under the EU BMR and is now authorised as a benchmark administrator under the UK Benchmarks Regulation (the UK legislation and rules onshoring the majority of the EU BMR following Brexit, as amended, the “UK BMR”). Benchmarks provided by IBA may continue to be used by supervised entities in the EU under EU BMR transitional provisions.
Users of ICE Swap Rate settings in respect of which LIBOR serves as the floating leg for the relevant interest rate swaps should note the section on our LIBOR webpage headed “The Future of LIBOR”.
In particular, IBA announced, on March 5, 2021, that, as a result of IBA not having access to input data necessary to calculate 3 Month and 6 Month GBP LIBOR settings on a representative basis beyond December 31, 2021, it will have to cease the publication of the 3 Month and 6 Month GBP LIBOR settings on December 31, 2021, unless the FCA exercises its new powers (which are included in the Financial Services Act 2021 as amendments to the UK Benchmarks Regulation) to require IBA to continue publishing such LIBOR settings using a changed and unrepresentative methodology (also known as a “synthetic” basis). On March 5, 2021, the FCA announced that it would consult on requiring IBA to continue the publication of the 3 Month and 6 Month GBP LIBOR settings beyond December 31, 2021 on an unrepresentative, “synthetic” basis.
IBA does not expect to be able to continue to publish GBP LIBOR ICE Swap rate settings for which the 3 Month or 6 Month GBP LIBOR settings serve as the underlying rate for the floating leg of the relevant interest rate swaps after December 31, 2021, because IBA does not expect sufficient (or perhaps any) input data to be available based on eligible new interest rate swap transactions referencing GBP LIBOR settings from this time. IBA has sought feedback in a consultation on its intention to cease the publication of GBP LIBOR ICE Swap Rate for all tenors immediately after publication on December 31, 2021.
The consultation closed at 5:00pm London time on Friday, June 25, 2021 and IBA will publish a feedback statement in due course.
The consultation was not, and must not be taken to be, an announcement that IBA will cease or continue the publication of GBP LIBOR ICE Swap Rate, or any other ICE Swap Rate settings, after December 31, 2021, or any other date. The consultation did not relate to any ICE Swap Rate settings other than GBP LIBOR ICE Swap Rate (i.e. USD LIBOR ICE Swap Rate, EUR ICE Swap Rate or GBP SONIA ICE Swap Rate). IBA expects to consult on the potential cessation of USD LIBOR ICE Swap Rate in due course.
ISDA Consultation on the implementation of suggested fallbacks for GBP LIBOR ICE Swap Rate and USD LIBOR ICE Swap Rate
The Non-Linear Task Force (NLTF) of the Working Group on Sterling Risk-Free Reference Rates in the UK and a Subcommittee of the Alternative Reference Rates Committee (ARRC) in the US, have each published papers (“Transition in Sterling Non-Linear Derivatives referencing GBP LIBOR ICE Swap Rate (ISR)” and “Suggested Fallback Formula for the USD LIBOR ICE Swap Rate”) suggesting fallbacks that could apply for GBP LIBOR ICE Swap Rate and USD LIBOR ICE Swap Rate, respectively, if LIBOR in the relevant currencies and tenors ceases and those ICE Swap Rate benchmarks cease to be available.
On June 11, 2021 the International Swaps and Derivatives Association (ISDA) launched a consultation on draft amendments to the 2006 ISDA Definitions designed to implement the fallbacks for GBP LIBOR ICE Swap Rate proposed in the paper published by the NLTF and the fallbacks for USD LIBOR ICE Swap Rate suggested in the paper published by the subcommittee of the ARRC, in each case in a scenario where those ICE Swap Rate benchmarks were unavailable and LIBOR in the relevant currency and tenor had permanently ceased or become unrepresentative. The consultation closed on Friday, July 2, 2021 and ISDA aims to publish the results of the consultation in July.
“SOFR First” initiative
On June 8, 2021, the Commodity and Futures Trading Commission’s (CFTC) Market Risk Advisory Committee (MRAC) Interest Rate Benchmark Reform Subcommittee voted to recommended a market best practice for switching interdealer trading conventions from USD LIBOR to the Secured Overnight Financing Rate (SOFR) for USD linear interest rate swaps, referred to as “SOFR First”. The initiative recommends that, from July 26, 2021, interdealer brokers replace trading of USD LIBOR-linked linear swaps with trading of SOFR-linked linear swaps. It suggests that interdealer broker screens for USD LIBOR-linked linear swaps should remain visible for informational purposes only after this date up until October 21, 2021, after which they should be turned off altogether.
As noted below, the methodology for USD LIBOR ICE Swap Rates uses input data consisting of quotes for prices and volumes of USD LIBOR-linked swaps, including quotes from interdealer broker screens at Level 1 of the Waterfall. To the extent that the SOFR First initiative results in interdealer broker screens ceasing to display quotes, or reducing the number of displayed quotes, for relevant USD LIBOR-linked swaps, this could result in a greater reliance on Levels 2 and 3 of the Waterfall in calculating USD LIBOR ICE Swap Rate. Insofar as the initiative results in a reduction of eligible input data at any level of the Waterfall, it might consequently impact IBA's ability to calculate and publish one or more USD LIBOR ICE Swap Rates.
Please see the MRAC’s FAQs on SOFR First for further information on this initiative.
In the UK, SONIA has been recommended as the preferred near risk free rate for use in Sterling derivatives and relevant financial contracts. As a result, IBA sought feedback and consulted on publishing a GBP ICE Swap Rate for SONIA swaps.
Following a positive market response to IBA’s feedback and consultation papers, and the successful publication of daily indicative GBP SONIA ICE Swap Rate ‘Beta’ settings since October 2, 2020, IBA launched GBP SONIA ICE Swap Rate as a benchmark for use by licensees on December 14, 2020. The settings are provided for use by licensees on and subject to the terms of their current GBP ICE Swap Rate licensing agreements.
GBP SONIA ICE Swap Rate settings are determined using the published ICE Swap Rate ‘Waterfall’ methodology using eligible input data in respect of SONIA interest rate swaps, and are available for the same tenors and at the same time as the current GBP LIBOR ICE Swap Rate. The settings are available from IBA and licensed redistributors.
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 trademarks of the Bank of England.
IBA started publishing indicative GBP SONIA Spread-Adjusted ICE Swap Rate ‘Beta’ settings from May 5, 2021 for an initial testing period.
The settings will be determined in line with the methodology proposed by the Non-Linear Task Force of the Working Group on Sterling Risk-Free Reference Rates in its paper “Transition in Sterling Non-Linear Derivatives referencing GBP LIBOR ICE Swap Rate (ISR)”.
IBA is publishing the GBP SONIA Spread-Adjusted ICE Swap Rate ‘Beta’ settings during the testing period solely for information and illustration purposes in order to enable stakeholders to evaluate the rates and provide feedback. The settings are not intended for, and IBA expressly prohibits their use for, any other purpose, including as a reference, index or benchmark in financial instruments, financial contracts, or investment funds. IBA will announce in due course when the GBP SONIA Spread-Adjusted ICE Swap Rate ‘Beta’ settings will be made available for use in financial instruments.
GBP SONIA Spread-Adjusted ICE Swap Rate ‘Beta’ settings are available here.
In June 2020, following market consultation, IBA implemented a waterfall approach for the ICE Swap Rate methodology. The first level of the Waterfall (“Level 1”) uses eligible, executable prices and volumes provided by regulated, electronic, trading venues. If these trading venues do not provide sufficient eligible input data to calculate a 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 displayed electronically by trading venues. If there is insufficient eligible input data to calculate a rate in accordance with Level 2 of the Waterfall, then the third level of the Waterfall (“Level 3”) uses movement interpolation, where possible for applicable tenors, to calculate a rate. Where it is not possible to calculate an ICE Swap Rate benchmark rate at Level 1, Level 2 or Level 3 of the Waterfall, then the Insufficient Data Policy applies for that rate. Users of ICE Swap Rate settings in respect of which LIBOR serves as the floating leg for the relevant interest rate swaps should note the section on our LIBOR webpage headed “The Future of LIBOR”.
IBA uses multiple, randomised snapshots of market data taken during a short window before calculation. This enhances the benchmark's robustness and reliability by protecting against attempted manipulation and temporary aberrations in the underlying market.
Snapshots which do not contain sufficient eligible market data are not included in the calculation.
A minimum number of liquid snapshots is required to perform the calculation.
To protect against unrepresentative market data influencing the benchmark, outlier snapshots are not included in the calculation.
IBA uses data from the remaining snapshots to determine the ICE Swap Rate using a quality weighting based on the tightness of the spread of the eligible data.
ICE Swap Rate is calculated and published in seven benchmark ‘runs’ covering three currencies – EUR, GBP and USD – at the following specified times, with tenors ranging from 1 year to 30 years as indicated in the below table:
|TENOR||EUR EURIBOR 1100||EUR EURIBOR 1200||GBP LIBOR 1100||USD Spreads 1100||USD Spreads 1100||USD LIBOR 1500||GBP SONIA 1100|
In respect of each benchmark run and tenor:
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 benchmark runs and tenors, except that, for the benchmark run that is USD Spreads 1100 and the associated tenors, the bid and offer prices are for spreads of such fixed leg percentage rates over the annual percentage yield payable on an on-the-run US Treasury Bonds satisfying the requirements in the table below in respect of the applicable tenors. Input data is provided by the relevant trading venues on an “as is” basis.
|Benchmark Run||1Y Tenor||Tenors over 1Y|
|Interest Rate Swap|
|Fixed Rate Leg Day-count||Fixed Rate Leg Period||Floating Leg Interest rate basis (m=month)||Fixed Rate Leg Day-count||Fixed Rate Leg Period||Floating Leg Interest rate basis (m=month)|
|EUR Rates 1100||30/360||Annual||3m EURIBOR||30/360||Annual||6m EURIBOR|
|EUR Rates 1200||30/360||Annual||3m EURIBOR||30/360||Annual||6m EURIBOR|
|GBP Rates 1100||Actual/365||Annual||3m LIBOR||Actual/365||Semi-annual||6m LIBOR|
|USD Rates 1100||30/360||Semi-annual||3m LIBOR||30/360||Semi-annual||3m LIBOR|
|USD Rates 1500||30/360||Semi-annual||3m LIBOR||30/360||Semi-annual||3m LIBOR|
|GBP SONIA Rates 1100||Actual/365||Annual||Overnight SONIA compounded in arrears for twelve months using standard market conventions||Actual/365||Annual||Overnight SONIA compounded in arrears for twelve months using standard market conventions|
|Benchmark Run||Tenors over 1Y|
|Interest Rate Swap||Bond|
|Fixed Rate Leg Day-count||Fixed Rate Leg Period||Floating Leg Interest rate basis (m=month)||Day-count||Period||Type|
|USD Spreads 1100||30/360||Semi-annual||3m LIBOR||Actual/actual||Semi-annual||US Treasury on-the-run|
The Standard Market Sizes in respect of the hypothetical trades that are required to be filled at Level 1 or Level 2 of the Waterfall for each benchmark run and tenor are specified in the below table (numbers in millions):
|GBP SONIA Rates
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:
If you operate a suitable trading venue, or would like to suggest one for consideration, please email [email protected].
IBA is responsible for ensuring that there is appropriate governance over ICE Swap Rate, 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.
Current and previous consultations are available below:
Changes to the methodology are governed by IBA’s consultation policy.
ICE Swap Rate is not calculated or published on certain days.
The specific days for each year are: