NEW YORK--(BUSINESS WIRE)--The International Swaps and Derivatives Association, Inc. (ISDA) today published an Invitation to Tender for the role of benchmark administrator for ISDAFIX rates. The tender is the latest step in ISDA’s process to align ISDAFIX with evolving best practices in the setting of benchmark rates by establishing a fully automated rate-setting process.
The successful tenderer will become the new benchmark administrator and calculation agent for ISDAFIX benchmark rates, responsible for:
- Governance of all ISDAFIX administrative processes including oversight and decisions of methodology, systems and controls;
- Daily operations, including collection of input data and calculation of ISDAFIX rates;
- Ex-ante and ex-post checks on submissions to ensure the integrity of the benchmark.
Those firms interested in submitting a tender should contact Catherine Farrer at email@example.com by February 28, 2014 to receive the Invitation to Tender document. The deadline to submit a tender response is March 21, 2014. ISDA expects to announce the successful bidder by the end of April 2014. ISDA will continue to support the ISDAFIX benchmark during the transition to a new administrator to ensure continuity and minimize disruption for market participants.
The tender process follows a number of important changes made to the submission methodology process last month, including a standardization of the polling process across currencies. The appointment of the new benchmark administrator will coincide with the next phase of development: moving from the current bank submission-based method to an automated model that utilizes live, executable prices from multilateral trading facilities (MTFs).
The target for the transition to a MTF-based approach is the second quarter of this year for euro swaps, with the US dollar and sterling swaps following by the end of 2014.
The changes to ISDAFIX have been spearheaded by the ISDA Benchmark Committee. The committee was formed to develop strategy and policy recommendations for the ISDA Board regarding interest rate benchmarks with which ISDA is directly involved or which will have an impact on ISDA members, over-the-counter (OTC) derivatives markets, or new and legacy OTC derivative transactions. ISDA arranged for the consulting firm Oliver Wyman to help the committee strengthen the process, governance and controls for the existing ISDAFIX framework and to help develop the MTF-based approach.
In addition to the work to improve the ISDAFIX process, ISDA is also assisting with benchmark reforms on a broader level. Furthermore, ISDA Chairman Stephen O’Connor serves as vice-chairman of the Financial Stability Board’s Market Participants Group (MPG).
ISDAFIX is the leading benchmark for annual swap rates for swap transactions worldwide. This screen service provides average mid-market swap rates for four major currencies at selected maturities on a daily basis. ISDAFIX rates are currently based on a midday and, additionally in some markets, end-of-day polling of mid-market rates. ISDA established ISDAFIX in 1998 in co-operation with Reuters (now Thomson Reuters) and Intercapital Brokers (now ICAP plc). At present, ISDAFIX provides rates for euro, British pound, Swiss franc and US dollar. In addition, ISDAFIX provides US dollar swap spreads. Additional information regarding ISDAFIX is available in the ISDA website’s asset classes section under Interest Rates Derivatives.
Since 1985, ISDA has worked to make the global over-the-counter (OTC) derivatives markets safer and more efficient. Today, ISDA has over 800 member institutions from 62 countries. These members include a broad range of OTC derivatives market participants including corporations, investment managers, government and supranational entities, insurance companies, energy and commodities firms, and international and regional banks. In addition to market participants, members also include key components of the derivatives market infrastructure including exchanges, clearinghouses and repositories, as well as law firms, accounting firms and other service providers. Information about ISDA and its activities is available on the Association's web site: www.isda.org.
ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc.