OCBC Bank and Standard Chartered on Monday completed Singapore’s first overnight indexed swap derivatives transaction using the Singapore Overnight Rate Average as the interest rate benchmark, paving the way for its further adoption.
Both banks were the first financial institutions in Singapore to successfully transact in derivatives that reference the Singapore Overnight Rate Average (SORA), taking the first steps to further the SORA as an important interest rate benchmark. The trade completed is a one-year interest rate swap fixed against SORA.
«This marks a key first step in our efforts in Singapore to develop a vibrant and active interest rate derivatives market based on SORA,» said Daniel Koh, Global Head of Treasury Markets of Standard Chartered Bank in a media statement.
Roadmap for Developing New Markets
«The global financial industry is moving towards referencing overnight Risk-Free Rates as they are anchored on active and liquid underlying market transactions as part of daily liquidity management or cash management balancing. With this first derivatives transaction involving the use of SORA, we hope to set out the market conventions for SORA-based products and develop some baseline activity for market participants to gain confidence in SORA,» said Lam Kun Kin, Head of Global Treasury and Investment Banking at OCBC Bank.
The transaction comes after the Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee (ABS-SFEMC)’s 30 August 2019 consultation report, which set out a roadmap for the development of new SORA-based markets. SORA is a transaction-based interest rate benchmark underpinned by the SGD overnight interbank funding market and has been published by the Monetary Authority of Singapore since July 2005.
