DOCSLIB.ORG

Welcome to the Transfer Pricing Webinar!

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Welcome to the Transfer Pricing Webinar! Welcome to the Transfer Pricing webinar! We are waiting for all the participants to join and we will get started shortly… Transfer Pricing webinar: (L)IBOR Transition and Intra-Group Financing – Transfer Pricing Aspects of an Unprecedented Transformation 25 August 2020 Introduction to Zoom How can you interact? Webinar support Eleonora Zelger Optimising your Zoom Master view • To optimize your view, you can toggle between Chat for technical difficulties speakers and slides by clicking on the button in the right top corner • If you have any technical difficulties or require assistance with Zoom, please write to Eleonora Zelger in the Chat box and she will try to help you as soon as possible On sound • Everyone is on mute by default in the beginning of the webinar • During the Q&A session at the end of the webinar, you can click on the Raise Hand icon on the bottom to let us know you would like to unmute yourself to comment/ ask questions Ask questions • You can use the “Q&A box” to ask your questions 3 Greetings and introductions 4 With you today T H O M A S H U G SALIM DAMJI Deputy Head Group Tax, Partner, Transfer Pricing Julius Bär Group and Value Chain Alignment at Deloitte Switzerland GEORGY GALUMOV P E T E R N O B S XAVIER TINGUELY Director, Treasury & Debt Director, Transfer Pricing Manager, Transfer Pricing Advisory at Deloitte and Value Chain Alignment and Value Chain Alignment Switzerland 5 at Deloitte Switzerland at Deloitte Switzerland Agenda 1 Greetings and introductions 4 2 Main aspects of the (L)IBOR transition 7 3 Overview of treasury and commercial considerations 15 4 Focus on key transfer pricing implications 18 5 Industry perspective 22 6 Q&A and closing 23 6 Main aspects of the (L)IBOR transition 7 What are (L)IBORs? (L)IBORs are benchmarks interest rate at which major global banks lend to one another in the international interbank market for short-term loans What are • Published on a daily base for tenors ranging from overnight to 12 months (L)IBORs • Calculated by averaging panel banks submissions • Include both the expected cost of lending funds and the interbank credit risk (i.e. they are quoted on an “unsecured” base) The major (L)IBORs are • LIBOR – London Interbank Offered Rate – published for USD, EUR, GPB, CHF and JPY / administered by ICE and regulated by the FCA Major (L)IBORs • Euribor – Euro Interbank Offered Rate – published for EUR / administered by EMMI • TIBOR – Tokyo Interbank Offered Rate – published for EUR / administered by EMMI There are (L)IBORs across other currencies, but the bulk of the volume leverages the above reference rates 8 Who uses (L)IBORs and what for? (L)IBORs are one of the most used benchmark globally, there is an estimated USD 350tn of financial products linked to (L)IBORs Who uses (L)IBORs • Main categories of products: Loans, Bonds (FRNs), Derivatives (e.g. IRS), Structured Products • All industries impacted: Banks, Asset Managers, Corporates, supranational entities They are broadly used across institutions • To price products; What are • As discounting factor to value assets (e.g. collateral); (L)IBORs used for • As benchmark performance; or • In treasury/risk processes/intercompany agreements (e.g. FTP) 9 Why change? In the aftermath of the 2007-08 financial crisis, it became apparent that these reference rates are inadequate due to their lack of robustness In 2017, the FCA announced that due to insufficient meaningful data to sustain the LIBOR rate, the benchmark will be Decline in liquidity discontinued at the end of 2021 By end of 2021, FCA will not Reluctance from Panel Banks to submit quotes compel banks to contribute to LIBOR Scandals related to alleged manipulations 10 The (L)IBOR transition will not be a simple rate replacement transition Three key changes leading to operational, structural and economic challenges that need to be addressed to avoid top- and bottom-line impact Key changes Current state Future state Impact • Same administrator (ICE) • Different administrators across • Reference rate different across across main currencies (EMMI the different currencies (e.g. different currencies, with likely Decentralised in case of EURIBOR) SIX for SARON, The Fed for different standards, leading to governance SOFR) operational challenges • Term rates published on a daily • Benchmarks are overnight rates • Absence of term rate with basis for 7 tenors (from potentially strong impact on • Plan for some currencies to Structural overnight to 12 months) pricing methodology publish term rates based on changes derivatives markets (OIS, • Clear communication internally futures) and toward clients to mitigate conduct risk • IBOR (and EURIBOR) published • Secured or unsecured • Transition with spread adjustment on an unsecured basis, i.e. depending on the currency required for CHF and USD inclusion of credit risk in values Economic • Transition likely with winners and changes loser 11 New benchmarks have been determined, but only exist for “overnight” Replacement rates are currently being defined by the different National Working Groups, decentralised governance leading to operational challenges LIBOR (today) USD EUR GBP CHF JPY Intercontinental Federal Reserve European Central Administrator Bank of England SIX Swiss Exchange Bank of Japan Exchange (ICE) Bank of New York Bank National Alternative WG on Risk-Free Study Group on WG on Sterling Risk- Working Group N.a. Reference Rates Reference Rates for NWG on CHF Risk-Free Reference Free Reference Rates (NWG) Committee (ARRC) the Euro Area Rates Benchmark LIBOR SOFR ESTER SONIA SARON TONAR (overnight only) No release date Planned, end-2021, Planned, Q1 2020, Planned, mid-2021, Term Rate Yes know, but probably Not recommended based on OIS likely based on OIS likely based on OIS based on OIS Secured / Unsecured Secured Unsecured Unsecured Secured Unsecured Unsecured 12 New reference rates will be structurally different, in particular SARON SARON will only be published as an overnight rate, structurally changing the way the market operates today – will price of products only be known at the end of the period? LIBOR SARON (Current environment) (Future environment) From the market O/N 1w 1m 2m 3m 6m 12m O/N Different options discussed at LIBOR fixing Continuously compounded the NWG (incl. forward-looking (Forward-looking) (Backward-looking) options) – see next slide Impact on Products Today 3m Toady 3m • LIBOR is published daily for 7 tenors, allowing to know • SARON only published on an overnight basis the pricing for a period at the beginning of the period Key • Period pricing only known at the end of the period by Considerations • Client does not have uncertainty during the period compounding the daily overnights rates • Client takes on market risk during the period 13 New reference rates will be economically different, in particular SARON and SOFR SARON/SOFR are quoted as secured rated (LIBOR is unsecured), there will therefore be a transition spread – depending on the period considered, the spread will be different SARON-LIBOR Spread (monthly average) 4 3.5 • LIBOR is quoted on an 3 unsecure base, while SARON/SOFR are on a 2.5 secured one 2 • This implies that there 1.5 is a credit risk spread 1 between the old and new benchmarks 0.5 • The spread between 0 SARON and LIBOR -0.5 tends to increase during periods of financial -1 turmoil (e.g. 2007- -1.5 2008), when credit risk is high Jul-01-2001 Jul-01-2002 Jul-01-2003 Jul-01-2004 Jul-01-2005 Jul-01-2006 Jul-01-2007 Jul-01-2008 Jul-01-2009 Jul-01-2010 Jul-01-2011 Jul-01-2012 Jul-01-2013 Jul-01-2014 Jul-01-2015 Jul-01-2016 Jul-01-2017 Jul-01-2018 Jul-01-2019 Jul-01-2020 Jan-01-2001 Jan-01-2002 Jan-01-2003 Jan-01-2004 Jan-01-2005 Jan-01-2006 Jan-01-2007 Jan-01-2008 Jan-01-2009 Jan-01-2010 Jan-01-2011 Jan-01-2012 Jan-01-2013 Jan-01-2014 Jan-01-2015 Jan-01-2016 Jan-01-2017 Jan-01-2018 Jan-01-2019 Jan-01-2020 LIBOR 3M (CHF) LIBOR ON (CHF) SARON 14 Overview of treasury and commercial considerations 15 What needs to be done before (L)IBOR is terminated by 2021 Focus on five key topics • Establishing the scenarios and assumptions • Prepare programme plan including activities, timings, resource, costs • Defining the scope, methodology, tooling and Technology and delivery risks • Gathering and analysing the inputs and data needed to complete the assessment Impact Analysis Solution Design Fallback Language Identify contracts with duration longer than 2021 Review contracts around trigger event, fallback rate and fallback spread Define tactical changes needed now for existing products FX / IR program Identify implications to FX / IR hedging program Define long-term strategy Identify hedge accounting of interest rate cash Review possibilities of applying IFRS 9 and IAS 39 relief from the effects Accounting flows and instrument valuation techniques based of (L)IBOR reform on prospective assessment on (L)IBOR Review impacts from changes in FV as well as Define measures to avoid changes to financial instruments which could Taxes transfer pricing agreements incl. LIBOR trigger tax events references Identifying systems using (L)IBOR (e.g. yield IT Infrastructure Define program architecture and capabilities versus requirements curves) 16 What can be done in addition during (L)IBOR transition Focus on optimisation of IC loan portfolio and FX translation P&L impact minimisation Analysis of FX P&L Impact . Detailed analysis of current IC loan portfolio on FX p&l impact . Analyse local and consolidated impact • Besides (L)IBOR aspects Prove IC loan translation impact minimisation focus on FX translation Prepare to group IC loan portfolio to define impacts on local and group (consolidation) Redesign IC Loan portfolio level • Use contractual .
Load more

Recommended publications
  • Interbank Offered Rates (Ibors) and Alternative Reference Rates (Arrs)
    VERSION: 24 SEPTEMBER 2020 Interbank Offered Rates (IBORs) and Alternative Reference Rates (ARRs) The following table has been compiled on the basis of publicly available information. Whilst reasonable care has been taken to ensure that the information in the table is accurate as at the date that the table was last revised, no warranty or representation is given as to the information in the table. The information in the table is a summary, is not exhaustive and is subject to change. Key Multiple-rate approach (IBOR + RFR) Moving to RFR only IBOR only Basis on Development of Expected/ Expected fall which forward-looking likely fall- back rate to IBOR is Expected ARR? back rate to the ARR (if 3 Expected being Date from date by the IBOR2 applicable) discontinu continued which which ation date (if Alternative ARR will replaceme for IBOR applicable Reference be nt of IBOR Currency IBOR (if any) )1 Rate published is needed ARS BAIBAR TBC TBC TBC TBC TBC TBC TBC (Argentina) 1 Information in this column is taken from Financial Stability Board “Reforming major interest rate benchmarks” progress reports and other publicly available English language sources. 2 This column sets out current expectations based on publicly available information but in many cases no formal decisions have been taken or announcements made. This column will be revisited and revised following publication of the ISDA 2020 IBOR Fallbacks Protocol. References in this column to a rate being “Adjusted” are to such rate with adjustments being made (i) to reflect the fact that the applicable ARR may be an overnight rate while the IBOR rate will be a term rate and (ii) to add a spread.
    [Show full text]
  • LCH Clears First Swaps Referencing SARON
    LCH clears first swaps referencing SARON Migration to new Swiss reference rate comes ahead of discontinuation of TOIS on 29 December 2017 SwapClear has cleared circa CHF 30 trillion in Swiss Franc-denominated interest rate derivatives since the service’s inception Basler Kantonalbank, Credit Suisse and Zürcher Kantonalbank among the first members to clear using the new rate 18 October 2017 LCH, a leading global clearing house, today announced that it is now clearing Swiss Franc (CHF) interest rate swaps referencing SARON, the Swiss average overnight rate. The move comes ahead of the migration of CHF reference interest rates from TOIS to SARON, scheduled for 29 December 2017. Basler Kantonalbank, Credit Suisse and Zürcher Kantonalbank were among the first market participants to begin clearing using the rate. SARON is the new rate to be used for CHF overnight indexed swaps (OIS) and has recently been recommended as the alternative to Swiss Franc LIBOR and TOIS*. LCH has cleared approximately CHF 30 trillion in Swiss Franc-denominated interest rate derivatives since SwapClear started clearing the currency in June 2002. Michael Davie, Global Head of Rates, LCH, said: “The Swiss market is in the vanguard of a global move to new risk-free reference rates, attracting special attention given the Swiss Franc’s reserve currency status. LCH is delighted to have worked closely with our members, their clients and the regulators to effect a smooth and timely transition from TOIS to SARON. As well as clearing OTC derivatives referencing SARON, LCH has adopted this new preferred rate for cash flow discounting and investment benchmarking.
    [Show full text]
  • LIBOR Transition - Impacts to Corporate Treasury
    LIBOR Transition - Impacts to Corporate Treasury April 2019 What is happening to LIBOR? London Interbank Offered Rate (LIBOR) is a benchmark rate that some of the world’s leading banks charge each other for unsecured loans of varying tenors. In 2017, Financial Conduct Authority stated that it will no longer compel banks to submit LIBOR data to the rate administrator post 2021 resulting in a clear impetus and need to implement alternative risk-free rates (RFR) benchmarks globally. End of LIBOR LIBOR transition 2019 - 2021 Post 2021 Risk-free rates SOFR (U.S.) LIBOR (RFR) Phase-out RFRs • an unsecured rate at which banks and SONIA (U.K.) • rates based on secured or unsecured ostensibly borrow from one another transactions replace ESTER (E.U.) • a rate of multiple maturities with… • overnight rates • a single rate Other RFRs… • different rates across jurisdictions How about HIBOR? Unlike LIBOR, the HKMA currently has no plan to discontinue HIBOR. The Treasury Market Association (TMA) has proposed to adopt the HKD Overnight Index Average (HONIA) as RFR for a contingent fallback and will consult industry stakeholders later in 2019. © 2019 KPMG Advisory (Hong Kong) Limited, a Hong Kong limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. 2 How do I know who is impacted? Do you have any floating rate Do you have any derivative loans, bonds, or other similar contracts (e.g. interest rate Do you need to calculate financialEnsure they instruments have difficult with swap) with an interest leg market value of financial an interestconversations rate referenced to referenced to LIBOR? positions (e.g.
    [Show full text]
  • A Quick Guide to the Transition to Risk-Free Rates in the International Bond Market
    A quick guide to the transition to risk-free rates in the international bond market 27 February 2020 A quick guide to the transition to risk-free rates in the international bond market February 2020 1 Disclaimer This paper is provided for information purposes only and should not be relied upon as legal, financial, or other professional advice. While the information contained herein is taken from sources believed to be reliable, ICMA does not represent or warrant that it is accurate or complete and neither ICMA, nor its employees, shall have any liability arising from or relating to the use of this publication or its contents. © International Capital Market Association (ICMA), Zurich, 2020. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission from ICMA. A quick guide to the transition to risk-free rates in the international bond market February 2020 2 Introduction This Quick Guide is intended to highlight the key issues on which ICMA is focused in the transition from IBORs to alternative near risk-free reference rates (“RFRs”) in the international bond market (including floating rate notes (“FRNs”), covered bonds, capital securities, securitisations and structured products, together, “bonds”); and provide links to relevant resources. More information is available on the ICMA benchmark reform and transition to RFRs webpage and from the ICMA contacts listed below. This Quick Guide reflects the position as at its date, but market participants should note that there
    [Show full text]
  • Minutes, Please See Page 4 Ff.)
    Press release (For meeting minutes, please see page 4 ff.) National Working Group on Swiss Franc Reference Rates [email protected] Zurich, 2 July 2021 Executive summary of the 1 July 2021 meeting of the National Working Group on Swiss Franc Reference Rates The National Working Group on Swiss Franc Reference Rates (NWG) met on 1 July 2021 to discuss the progress of the LIBOR transition in Switzerland and relevant international developments. The key items and main recommendations of yesterday’s meeting were: (i) Members reviewed important milestones regarding the transition from LIBOR. First, ICE Benchmark Administration (IBA) and the UK Financial Conduct Authority (FCA) released on 5 March 2021 their statements confirming that all Swiss franc (CHF) LIBOR settings will cease immediately after the LIBOR publication on 31 December 2021. Second, with the publication of the IBA statement, ISDA adjustment spreads for all LIBOR settings were fixed. There will be no synthetic rate for CHF LIBOR. (ii) FINMA provided an update on their self-assessment survey, according to which a large fraction of the cash market already transitioned to SARON but some market participants still need to accelerate their reduction of legacy LIBOR contracts. Furthermore, FINMA emphasized that it is important to timely meet the deadlines of the FINMA Guidance 10/2020 (LIBOR transition roadmap). After 30 June 2021, new contracts should in general be based on alternative reference rates (e.g. SARON and SOFR). FINMA reminded members that full operational readiness is required by 31 December 2021. (iii) Regarding options for using compounded SARON, members reviewed the guidance given so far.
    [Show full text]
  • Product Specific Contract Terms and Eligibility Criteria Manual
    PRODUCT SPECIFIC CONTRACT TERMS AND ELIGIBILITY CRITERIA MANUAL CONTENTS Page SCHEDULE 1 REPOCLEAR ................................................................................................... 3 Part A Repoclear Contract Terms: Repoclear Contracts arising from Repoclear Transactions, Repo Trades or Bond Trades .......................................................... 3 Part B Product Eligibility Criteria for Registration of a RepoClear Contract ................... 9 Part C Repoclear Term £GC Contract Terms: Repoclear term £GC Contracts Arising From Repoclear Term £GC Transactions Or Term £GC Trades ........................ 12 Part D Product Eligibility Criteria for Registration of a RepoClear Term £GC Contract ............................................................................................................................. 19 SCHEDULE 2 SWAPCLEAR ................................................................................................ 21 Part A Swapclear Contract Terms ................................................................................... 21 Part B Product Eligibility Criteria for Registration of a SwapClear Contract ................ 36 SCHEDULE 3 EQUITYCLEAR ............................................................................................. 46 Part A EquityClear (Equities) Contract Terms ................................................................ 46 Part B EquityClear Eligible (Equities) ............................................................................ 48 Part C EquityClear
    [Show full text]
  • Methodology Rulebook Governing the Swiss Reference Rates
    Swiss Index Methodology Rulebook Governing the Swiss Reference Rates 17.06.2021 Swiss Index Methodology Rulebook Governing the Swiss Reference Rates 17.06.2021 Table of Content 1 Structure of Swiss Reference Rates ...................................................................................................................... 4 1.1 Introduction ..........................................................................................................................................................................4 1.2 General Principles.................................................................................................................................................................4 1.3 Index Family Overview .........................................................................................................................................................5 1.4 Data Availability and Publication ........................................................................................................................................6 2 Calculation of Average Rates (for Example SARON) ........................................................................................... 8 2.1 Trades ....................................................................................................................................................................................8 2.2 Quotes ....................................................................................................................................................................................8
    [Show full text]
  • The Endgame: Benchmark Reform and Transition from Ibors
    The Endgame: Benchmark Reform and Transition from IBORs Wayne Fitzgerald Jack Hattem Patrick Leung Sachiyo Sakemi Global COO, Deputy CIO, Head of APAC Fixed Legal & Compliance Portfolio BlackRock Obsidian Income and FX Management Group, Fund Trading Fixed Income Stephen Fisher Deniz Yegenaga Uran Guma Samantha DeZur Global Public Policy European Asset Investment Platform, Global Public Policy Group Backed Securities Global Trading Group Team, Global Fixed Income Group Additional contributors: Winnie Pun, Rob Mitchelson, Alexander Krol The transition from LIBOR continues to progress. Clarity regulatory guidance. With less than a year until many has increased with confirmation of the timelines for tenors of LIBOR will cease to be published, many major cessation and deadlines to cease issuance of new LIBOR milestones have already occurred and market participants contracts, finalized fallback language, and enhanced are actively engaged in the transition. However, there are Executive Summary Education and communication are the most important tools to ensure the industry and markets can successfully transition away from IBORs, including clear timelines, cross-functional internal working groups, regulatory guidance, and client engagement. BlackRock is supportive of the transition from IBORs to identified risk-free reference rates across jurisdictions, where we believe the greatest liquidity will exist. We acknowledge that there is no one-size-fits all solution and modified versions of the recommended reference rates, as well as alternatives to them, may be appropriate in some cases. However, we caution against a highly fragmented market, which would result in increased costs for end-investors. Understanding the differences between IBORs and alternative reference rates will allow for appropriate, informed portfolio management decisions.
    [Show full text]
  • TRANSITION to Rfrs REVIEW: Full Year 2020 and the Fourth Quarter of 2020
    January 2021 TRANSITION TO RFRs REVIEW: Full Year 2020 and the Fourth Quarter of 2020 The Transition to Risk-free Rates (RFRs) Review analyzes the trading volumes of over-the-counter (OTC) and exchange-traded interest rate derivatives (IRD) that reference selected alternative RFRs, including the Secured Overnight Financing Rate (SOFR), the Sterling Overnight Index Average (SONIA), the Swiss Average Rate Overnight (SARON), the Tokyo Overnight Average Rate (TONA), the Euro Short-Term Rate (€STR) and the Australian Overnight Index Average (AONIA). Global data is collected from all major central counterparties (CCPs) that clear OTC and exchange- traded derivatives (ETD) in the six currencies, including the Australian Securities Exchange, CME Group, Eurex, Intercontinental Exchange (ICE), Japan Securities Clearing Corporation, LCH and the Tokyo Financial Exchange. Only cleared transactions are captured in this data. US data is collected from the Depository Trust & Clearing Corporation (DTCC) swap data repository (SDR). It therefore only covers trades that are required to be disclosed under US regulations and includes cleared and non-cleared OTC IRD transactions. 1 TRANSITION TO RFRs REVIEW: Full Year 2020 and the Fourth Quarter of 2020 KEY HIGHLIGHTS FOR THE FULL YEAR 2020 AND THE FOURTH QUARTER OF 2020 Global Trading Activity1 In the full year 2020: The ISDA-Clarus RFR Adoption Indicator increased to 7.6% in the full year 2020 compared to 4.6% in the prior year2. The indicator tracks how much global trading activity (as measured by DV01) is conducted in cleared OTC and exchange-traded IRD that reference the identified RFRs in six major currencies3. RFR-linked IRD traded notional accounted for 8.8% of total IRD traded notional compared to 5.4% in 2019.
    [Show full text]
  • The LIBOR Transition
    www.pwc.ch The LIBOR transition Where are we now? Q1 2019 The LIBOR transition – Where are we now? A new paradigm, … …and our way to deal with it The transition away from currently used interbank offered To deal with this complexity, the present overview pro- rates, particularly LIBOR, to new or reformed benchmark vides the current status of the transition process along- rates poses one of the biggest challenges for financial side the five major currencies. We use a structured grid to firms in the upcoming years. Whereas some time ago, evaluate the administrative and methodological set-up of only few subject matter experts and newly appointed the new benchmarks, their envisaged fallback and term transition managers at financial firms dealt with the topic, approaches, the dynamics of their underlying borrowing it has in the meanwhile been brought to the attention of and lending markets, and the adoption of the rates by a broad range of industry practitioners. They all, how- cash and derivatives markets. ever, face the same challenge of coping with the growing For further thought leadership on this journey towards a complexity and faster pace of the developments around new financial paradigm, please have a look at pwc.com/ the transition. libor. …growing complexity… Yours, Staying ahead of the knowledge curve during the LIBOR transition increasingly resembles looking at a mosaic of information. Where LIBOR ensured a common, homoge- neous approach across multiple currencies, this simplic- ity will be lost under the new paradigm. The complexity is the result of multiple dimensions that accompany the transition.
    [Show full text]
  • EUROPEAN COMMISSION Brussels, 18.9.2013 SWD(2013) 336 Final COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying Th
    EUROPEAN COMMISSION Brussels, 18.9.2013 SWD(2013) 336 final COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on indices used as benchmarks in financial instruments and financial contracts {COM(2013) 641 final} {SWD(2013) 337 final} EN EN TABLE OF CONTENTS 1. INTRODUCTION ...................................................................................................................................................................1 2. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES....................................................................................2 2.1. CONSULTATION OF INTERESTED PARTIES ..................................................................................................................................2 2.2. STEERING GROUP...............................................................................................................................................................2 2.3. IMPACT ASSESSMENT BOARD ...............................................................................................................................................3 3. POLICY CONTEXT .................................................................................................................................................................3 3.1. THE CURRENT EU LEGISLATIVE FRAMEWORK ON BENCHMARKS ......................................................................................................3 3.2. NATURE
    [Show full text]
  • Transitioning from LIBOR to Alternative Reference Rates in Fusion
    Factsheet The transition from LIBOR to ARRs will take Transitioning from LIBOR to alternative place in stages up to 2021. New financial products referencing ARRs have already reference rates in Fusion Sophis been issued in the UK and US, including for futures, floating rate notes, and swaps. As the rates are new, the adoption and the The investment industry must prepare for the shift from LIBOR to alternative liquidity of products that reference them reference rates such as SOFR. This factsheet updates you on the transition remains under development. and explains how Fusion Sophis supports the new rates. However, to ensure a smooth transaction from LIBOR to ARRs, many issues remain to be clarified by authorities, for example: • Adoption of ARRs and liquidity for With LIBOR due to Alternative reference rates (ARRs) for five key currencies each currency across many interest be phased out by ARR €STER TONA SARON SONIA SOFR rate products 2021, alternative Name Euro short Tokyo Swiss Average Sterling Secured • Adjustment of ARRs to a term rate: reference rates are term rate Overnight Rate Overnight Overnight Overnight LIBORs are term rates on seven tenors, being developed Average Rate Index Average Financing Rate while ARRs are daily rates. The impact to replace this Currency EUR JPY CHF GBP USD on derivatives, especially options, needs benchmark, which Old LIBOR EONIA JPY-LIBOR CHF-LIBOR GBP-LIBOR US-FEDF to be scrutinized. underpins many EURIBOR JPY-TIBOR US-LIBOR • Managing outstanding positions that loans, mortgages, Publication T+1 T+1 Real-time T+1 T+1 reference LIBOR and are not closed bonds and interest Existing None Futures Future, swaps Futures, Futures, FRN, by 2022 rate derivatives.
    [Show full text]