Standard Chartered Clear SORA Swaps with LCH

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Since 2005 the Monetary Authority of Singapore has been publishing the SORA benchmark each day. The Singapore Overnight Rate Average (SORA) is the volume-weighted average rate of unsecured overnight interbank SGD transactions in Singapore between 9:00 am and 6:15 pm. 

  • SORA is a robust benchmark underpinned by a deep and liquid overnight interbank funding market.
  • SORA has been published by MAS since 1 July 2005. The availability of a long historical time series allows market participants to perform technical analysis and model trends for risk management, asset-liability pricing, and trading purposes. This should be supportive of a broad-based market adoption of SORA-based financial products.
  • The market convention for the use of overnight interest rates such as SORA is to reference its compounded average. Compounded SORA rates are significantly more stable compared to forward-looking term rates (e.g. SOR) which are exposed to idiosyncratic market factors on a single day’s fixing, such as quarter/year-end volatility.
  • The use of an overnight interest rate benchmark in SGD financial products is in line with similar developments in key global markets, particularly in derivatives. Measures needed to transition to SORA will thus have significant synergies with market participants’ ongoing efforts to develop trading capabilities in other near risk-free rates (RFR)-based financial products (e.g. SONIA, SOFR, SARON, TONA based derivatives).
  • Cash market products (e.g. loans, bonds) that reference compounded SORA will benefit from the availability of SORA-based derivatives, which will be the market standard for SGD derivatives in the coming years.

LCH is the first clearing house to offer clearing of Singapore Dollar swaps benchmarked to SORA, launched in collaboration with the market and in response to customer demand.

LCH announced that it has cleared the first Singapore Dollar interest rate swaps referencing the Singapore Overnight Rate Average (SORA). LCH has implemented clearing of SORA swaps as the industry continues to adopt alternative interest rate benchmarks.  Standard Chartered was party to the first cleared derivatives trade referencing SORA.

Kate Birchall, Head of Asia Pacific, LCH, said: The introduction of clearing derivatives referencing SORA is another important milestone in the global efforts to move to alternative reference rates. Clearing this product has involved close collaboration with a variety of stakeholders in Singapore and the wider market. We are pleased to bring these efforts to fruition by being the first to offer these new cleared products to our members and their clients to facilitate increased efficiencies.

Daniel Koh, Global Head, Treasury Markets, Standard Chartered and Chair of the Derivatives Sub-Group of the Steering Committee on SGD Swap Offer Rate (SOR) transition to SORA (SC-STS)said: “Standard Chartered is delighted to clear the first SORA swaps at LCH and to contribute to building liquidity in this product. Clearing this product is a vital step in the transition to broader adoption of SORA across the Singapore market, and we are in turn pleased to be able to offer SORA swaps to our clients for hedging.”

More information

  • The introduction of SORA swaps clearing at LCH follows its launch of clearing of €STR swaps in October 2019, SOFR swaps in July 2018, SONIA Futures in April 2018, and SARON swaps in October 2017. 
  • More information about SORA can be found via the Association of Banks in Singapore’s website: https://www.abs.org.sg/benchmark-rates/about-sora

Photo by Duy Nguyen on Unsplash

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