Intercontinental Exchange, Inc. (NYSE:ICE), a leading global
provider of data, technology, and market infrastructure, today
announced that ICE Benchmark Administration Limited (IBA), the
authorized and regulated administrator of LIBOR®, has provided an
update regarding LIBOR cessation and “synthetic” LIBOR following
previous announcements from the UK Financial Conduct Authority
(FCA).
On March 5, 2021, the FCA announced that all Swiss franc and
euro LIBOR settings, the 1 Week and 2 Month U.S. dollar LIBOR
settings, and the Overnight/Spot Next, 1 Week, 2-Month and 12-Month
sterling and Japanese yen LIBOR settings will cease immediately
after December 31, 2021, and that the Overnight and 12-Month U.S.
dollar LIBOR settings will cease immediately after June 30,
2023.
On September 29, 2021, the FCA announced, following a
consultation, that in order to help ensure an orderly wind down of
the 1-, 3- and 6-Month sterling and Japanese yen LIBOR settings it
will compel IBA to publish these six LIBOR settings under a
changed, “synthetic” methodology for the duration of 2022. The FCA
has noted that any settings published under a “synthetic”
methodology will no longer be representative of the underlying
market or economic reality the setting is intended to measure as
those terms are used in the UK Benchmarks Regulation (BMR).
The FCA announced that it has confirmed the changed methodology
that it will require IBA to use to determine the “synthetic” LIBOR
settings (following the FCA’s consultation proposals), which is as
follows1:
"Synthetic” LIBOR
Currency and
calculation
Tenor
Sterling
(ICE TSRR2 + ISDA
Spread Adjustment3)
Japanese Yen
(TORF4 + ISDA Spread
Adjustment3)
1 Month
1M ICE TSRR + 0.0326%
1M TORF x (360/365) -
0.02923%
3 Months
3M ICE TSRR + 0.1193%
3M TORF x (360/365) +
0.00835%
6 Months
6M ICE TSRR + 0.2766%
6M TORF x (360/365) +
0.05809%
1 Please see the FCA's draft Article 23D
notice for full details of the changes the FCA will impose on IBA
regarding the way that the 1-, 3- and 6-Month sterling and Japanese
yen LIBOR settings are to be determined after December 31, 2021.
The FCA will require IBA to publish each “synthetic” LIBOR setting
at or around 11:55 am London time on each applicable London
business day, except for London public holidays (as is the case for
“panel bank” LIBOR).
2 The ICE Term SONIA Reference Rate, which
is a forward-looking term SONIA reference rate, provided by
IBA.
3 With respect to each "synthetic" LIBOR
setting, the fixed spread adjustment that applies as part of the
ISDA IBOR fallback for each LIBOR setting, and that is published
for the purpose of the ISDA 2020 IBOR Fallbacks Protocol and ISDA
IBOR Fallbacks Supplement.
4 The Tokyo Term Risk Free Rate, which is
a forward-looking term TONA rate, provided by Quick Benchmarks
Inc.
The FCA notified IBA that it has designated these six LIBOR
settings as “Article 23A benchmarks” for the purposes of the BMR
with effect from January 1, 2022, which it must do in order to
enable it to require these changes. The FCA also noted that the
first non-representative publication of these six “synthetic” LIBOR
settings under the changed, unrepresentative, “synthetic”
methodology will be on January 4, 2022.
The FCA has also confirmed that it expects that the Overnight
and the 1-, 3-, 6- and 12-Month U.S. dollar LIBOR settings will
continue to be published on a representative basis, using panel
bank submissions under the current “panel bank” LIBOR methodology,
until the end of June 2023. The FCA has advised that it will
continue to consider the case for using its new and enhanced legal
powers to require IBA to continue the publication of the 1-, 3- and
6-Month U.S. dollar LIBOR settings beyond June 30, 2023 under a
changed, “synthetic”, unrepresentative methodology.
Under the BMR, new use of Article 23A benchmarks, including the
“synthetic” 1-, 3- and 6-Month sterling and Japanese yen LIBOR
settings, by UK-supervised entities in regulated financial
contracts, instruments and/or investment fund performance
measurement will be prohibited. The FCA has published a statement
of policy in relation to its power to permit the continued legacy
use of Article 23A benchmarks by UK-supervised entities in
equivalent circumstances. Following a consultation, on November 16,
2021, the FCA confirmed it will permit all legacy use of 1-, 3- and
6-Month sterling and Japanese yen “synthetic” LIBOR by
UK-supervised entities other than in “Cleared Derivatives” (whether
directly or indirectly cleared).
The FCA has also published a statement of policy in relation to
its power to prohibit the new use of a critical benchmark the
provision of which is to cease. The FCA confirmed on November 16,
2021, following consultation, that from January 1, 2022 it will
prohibit the new use by UK-supervised entities in regulated
financial contracts, instruments and/or investment fund performance
measurement of the continuing Overnight and 1-, 3-, 6- and 12-Month
U.S. dollar LIBOR settings, subject to certain exceptions.
The FCA has published the modifications it proposes to make to
the BMR as it will apply to 1-, 3- and 6-Month Sterling and
Japanese Yen “synthetic” LIBOR, having regard to the effects of its
designation of these six settings as “Article 23A benchmarks” and
the imposition of its proposed changes to the methodology for these
settings. These modifications are proposed to take effect from
January 1, 2022.
Please see IBA’s LIBOR webpage and the FCA’s LIBOR transition
webpage for further information.
About ICE Benchmark Administration
ICE Benchmark Administration is authorized and regulated
by the Financial Conduct Authority for the regulated activity of
administering a benchmark, and is authorized as a benchmark
administrator under the UK Benchmarks Regulation. LIBOR and ICE
Benchmark Administration are registered trademarks of IBA and/or
its affiliates.
About Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune
500 company that designs, builds and operates digital networks to
connect people to opportunity. We provide financial technology and
data services across major asset classes that offer our customers
access to mission-critical workflow tools that increase
transparency and operational efficiencies. We operate
exchanges, including the New York Stock Exchange, and
clearing houses that help people invest, raise capital and
manage risk across multiple asset classes. Our comprehensive fixed
income data services and execution capabilities provide
information, analytics and platforms that help our customers
capitalize on opportunities and operate more efficiently. At ICE
Mortgage Technology, we are transforming and digitizing the
U.S. residential mortgage process, from consumer engagement through
loan registration. Together, we transform, streamline and automate
industries to connect our customers to opportunity.
Trademarks of ICE and/or its affiliates include Intercontinental
Exchange, ICE, ICE block design, NYSE and New York Stock Exchange.
Information regarding additional trademarks and intellectual
property rights of Intercontinental Exchange, Inc. and/or its
affiliates is located here. Key Information Documents for
certain products covered by the EU Packaged Retail and
Insurance-based Investment Products Regulation can be accessed on
the relevant exchange website under the heading “Key Information
Documents (KIDS).”
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 -- Statements in this press release regarding
ICE's business that are not historical facts are "forward-looking
statements" that involve risks and uncertainties. For a discussion
of additional risks and uncertainties, which could cause actual
results to differ from those contained in the forward-looking
statements, see ICE's Securities and Exchange Commission (SEC)
filings, including, but not limited to, the risk factors in ICE's
Annual Report on Form 10-K for the year ended December 31, 2020, as
filed with the SEC on February 4, 2021.
ICE- CORP Source: Intercontinental Exchange
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ICE Media: Rebecca Mitchell Rebecca.Mitchell@ice.com +44
7951 057 351 ICE Investors: Mary Caroline O’Neal
marycaroline.oneal@ice.com (770) 738-2151
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