EBS BrokerTec, ICAP's market-leading electronic foreign exchange (FX) and fixed income business and ICAP Information Services (IIS), the information division of ICAP, announce today that they have launched the Sterling Repo Index Rate (£RIR).
The daily index measures the effective cost of funding for Sterling Government bonds.
Calculated and distributed by IIS, £RIR uses eligible one-day repo trades executed on the BrokerTec Market electronic central limit order book for the fixed income markets and centrally cleared via a central counterparty clearing house (CCP). The Index is based on a common settlement value using overnight, Tom-Next and Spot-Next repo trades in the UK government bond market (Gilts).
Overall daily volumes in Sterling sovereign repos typically exceed £20 billion (single count), on Brokertec Market, split between general collateral, DBV and specific collateral repo trades. The £RIR takes a volume-weighted average of repo rates from these trades which use UK government bonds as collateral, to provide an insight in to the overall cost of funding in the dealer to dealer market.
£RIR was created due to considerable interest from the Repo dealer community.
John Edwards, Managing Director of BrokerTec Europe, said: “Following the Bank of England’s working group on a Sterling Risk-Free Reference Rate in the fixed income markets, customers are increasingly looking for an effective measure of the cost of funding in the Sterling repo markets. Through £RIR, BrokerTec has launched the overnight index for the secured market which it hopes will become the central reference rate for transactions in the Sterling market. The design is consistent with the IOSCO Principles for Financial Benchmarks based on sufficient market data to produce a robust and reliable index”.
Jan de Smedt, Global Head of Indices, IIS, said: “By combining trade-backed data from the BrokerTec Market platform with transparent methodology and our independent governance model, we hope the £RIR will become a vital tool for market participants to assess the cost of funding in the Sterling repo market and finance and cover their bond positions accordingly.”
£RIR is available in real-time, end-of-day and historical formats and can be accessed via the Bloomberg terminal (Ticker SRIROTS), Reuters (page STERLINGREPO) or downloaded via a secure FTP site.