ICE releases LIBOR transition plan for Short Sterling and EuroSwiss futures

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ICE has released its LIBOR transition plan for Short Sterling and EuroSwiss futures.

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ICE Futures Europe today published plans for transitioning its LIBOR futures contracts in GBP and CHF into SONIA and SARON futures, respectively (link). After a consultation and feedback from market participants, the exchange proposes that:

 

  • “Following the close of business on Friday 17 December 2021, ICE will convert outstanding contracts in Transitioning LIBOR Contracts into the notional equivalent number of contracts in the RFR Futures Contract of the same currency. For example, two Three Month Sterling (Short Sterling) Futures will be converted into one Three Month SONIA Index Futures contract with the same delivery month

  • “The conversion will involve a value adjustment using the ISDA Fallback Spread

  • “Once the conversion is concluded, the legacy product codes will be removed from admission to trading.

  • “There will be no one-off payments between Clearing Members and the Clearing House related to any valuation changes – it being assumed that the ISDA methodology is fair and sufficiently disclosed and understood in the market.

  • “Provision will be made for the cash settlement of any odd lots arising from the differing Contract sizes as between the Transitioning LIBOR Contracts and the Contracts into which those Contracts are being converted.”

     

    In the meantime, ICE has developed functionality to enable members and clients wishing to transition existing positions in LIBOR to RFR futures contracts on "a voluntary and consensual basis" ahead of the 17 December deadline. ICE contends that users are currently able to benefit from "deep liquidity available in the markets for RFR futures contracts on the exchange.

     

    For three-month SONIA, the Exchange has "fully replicated the trading functionality" available in GBP LIBOR futures and options. SONIA futures are "gaining momentum", according to ICE, which estimates that 22% of three-month sterling risk was traded in SONIA in February 2021. In contrast, SARON Futures were relaunched on 1 March 2021. They are “available to trade” in the CLOB, ICE says, with a contract size equivalent and functionality “mirroring” that which is available in EuroSwiss futures.