With the end of LIBOR drawing closer, the FCA and Britain\u2019s central bank are encouraging market participants to actively transition from referencing LIBOR rates in their sterling non-linear derivatives.<\/p>\n
In this respect, the mega regulators recommend adopting new quoting conventions for inter-dealer trading based on SONIA, effective May 12. Instead of interbank offered rates, this step facilitates a further shift in market liquidity toward SONIA, bringing benefits for a wide range of users as they move away from LIBOR.<\/p>\n
Looking Forward to Meeting You at iFX EXPO Dubai May 2021 – Making It Happen!<\/strong><\/p>\n This shift is expected to boost liquidity in these products, which will aid relevant providers in achieving the Working Group\u2019s key milestone of ceasing GBP LIBOR-linked non-linear derivatives by the end of Q2 2021.<\/p>\n The FCA and BoE have been taking steps to promote the switch from LIBOR to SONIA. Throughout the last few months, they actively provided guidance to lenders, borrowers and investors who are amending their documentation to reference SONIA.<\/p>\n Earlier this month, the UK regulators announced final dates for the cessation of all London Interbank Offered Rate (LIBOR) benchmark settings, currently published by ICE Benchmark Administration (IBA).<\/p>\n The FCA has confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative after December 31, 2021.<\/p>\n The news comes as the\u00a0scandal-ridden LIBOR\u00a0is set to retire at the end of 2021 as the world\u2019s most important benchmark following a multiyear rigging scandal by major lender since the 2008 financial crisis.<\/p>\n They were also a dozen bankers that have been convicted on Libor rate-rigging charges in a series of prosecutions brought by global regulators, which ultimately prompted an overhaul of the rate-setting rules. Prosecutors alleged that bank traders dishonestly manipulated the rate to benefit their own trading positions, nudging them up or down while ignoring rules that they should be set independently.<\/p>\n LIBOR, which underpins more than $300 trillion in derivatives and other instruments, is also set to be replaced worldwide with the Bank of England\u2019s Sonia rate for sterling-denominated swaps, loans, and futures.<\/p>\n Global regulators\u00a0urged market participants\u00a0earlier last year to accelerate the shift to the Sonia overnight rate before it ceases issuance of cash products, referencing Libor by the fourth quarter.<\/p>\nAreas of Significant Concern<\/h2>\n