- Following publication of ISDA definitions, RFR paves the way for hedging and price discovery
London, 6 August 2014– ICAP Information Services (IIS), the information division of ICAP, and MTS, a leading fixed income electronic trading venue in Europe, announce today that they are expanding the RepoFunds Rate indices to include RepoFunds Rate Euro (RFR Euro), a daily repo index for Eurozone sovereign bonds.
The new index, RFR Euro, is derived from eligible repo transactions that involve sovereign bonds issued by any Eurozone country as collateral. The index is based on centrally cleared, electronically executed one business day repo transactions executed on BrokerTec, ICAP’s global electronic fixed income trading platform, and MTS. Typically, the traded volume of eligible repo transactions across the two trading platforms is €230 billion per day (single counted).
Designed as transparent and trade-backed references, the RepoFund Rate indices adhere to the IOSCO principles for financial benchmarks. IIS and MTS continue to explore the further expansion of RepoFunds Rate.
John Edwards, Managing Director at BrokerTec, said: “The RepoFunds Rate indices are robust and replicable benchmarks for derivatives and the development of a swap market. Following publication of the definitions by ISDA in April this year for the original three RFR indices, a suitable derivatives market can now develop to provide both a hedging mechanism and offer a source of price discovery for term financing of government bonds.”
Robert Walton, Director of Index Services at IIS, said: "RFR Euro is an important addition to the RepoFunds Rate index family. By providing a broader measure of the cost of financing sovereign bonds from issuers in the Eurozone, it complements the existing country-specific RepoFunds Rate indices."
Oliver Clark, Head of Money Market and Derivatives Product at MTS, said: “Where the three country specific RepoFunds Rate indices provide robust and relevant references for each of these separate sovereign bond markets, the new RFR Euro index gives euro cash investors, treasurers, bond traders and bond investors a benchmark for the whole Eurozone backed by over $200billion in cleared transactions collateralised with sovereign bonds.”
RepoFunds Rate is a series of daily euro repo indices which reflect the effective cost of secured funding in Eurozone sovereign bond markets. Launched in 2012 following consultation with the repo community, the current indices (RFR Germany, RFR France and RFR Italy) measure the cost of funding sovereign bonds issued by their respective countries.
The indices are published at the end of each business day and were launched in response to industry interest and demand, reflecting the importance of secured funding and the need for a suitable reference for derivatives for hedging and pricing.
RepoFunds Rate data, including historical data, is publicly available on the website at www.repofundsrate.com. Full details of the calculation methodology are also available on the website.
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IIS sits within ICAP’s Post Trade Risk and Information division which provides innovative services that enable customers to reduce cost and risk, as well as to increase efficiency, return on capital and capacity to process trades. ICAP is a leading markets operator and provider of post trade risk mitigation and information services. The Group matches buyers and sellers in the wholesale markets in interest rates, credit, commodities, FX, emerging markets and equity derivatives through voice and electronic networks. Through its post trade risk mitigation and information services ICAP helps customers manage and mitigate risks in their portfolios. For more information, go to www.icap.com.
ICAP’s BrokerTec platform is the leading regulated electronic trading venue for the fixed income markets, providing innovative technology solutions across a wide range of products to customers in 50 countries around the world. BrokerTec delivers efficient, transparent, anonymous and orderly electronic fixed income trading opportunities for all market participants. The BrokerTec offering includes trading solutions for many US and European fixed income products, including US Treasuries, European Government Bonds and European Repo. BrokerTec facilitates both API and manual trading, delivering solutions to support a broad range of trading strategies. For more information, go to www.icap.com/brokertec.
About MTS Group
MTS provides a professional trading environment for the interdealer marketplace, enabling primary dealers to access unparalleled liquidity, transparency and coverage. MTS delivers electronic fixed income trading, market data and indices and have over 500 unique counterparties and average daily volumes of €100 billion. For more information, go to www.mtsmarkets.com/.