ICE Benchmark Administration Limited (IBA) has published a report on ICE Term  Risk Free Rates in their role in helping the financial markets develop such risk free rates structures. As a market- a leading provider of regulated benchmarks, administering ICE LIBOR, ICE Swap Rate and the LBMA Gold and Silver Prices, IBA believe it is uniquely positioned to help build and publish robust and sustainable term structures for the risk free rates.

Two steps to deliver the new rates

IBA have :

1. Developed a preliminary methodology, based on futures contracts data, to derive a forward-looking term rate for SONIA (the Sterling Overnight Index Average, which was selected as the alternative risk free rate for the Sterling markets).
2. launched the ICE Term Risk Free Rates (RFR) Portal. IBA expects this webpage to be a valuable resource for market participants, providing three key pieces of information on alternative risk free rates on a daily basis:
   • Forward-looking one, three and six-month term risk free rates, initially for SONIA, derived from futures contracts and published SONIA data;
   • Realised simple and compounded averages for one, three and six-month periods, derived from historical, published risk free rate data;
   • The published overnight risk free rate.

The ICE Term Risk Free Rates (RFR) Portal

IBA in October began publishing the ICE Term RFR Portal on a daily basis. This webpage is designed to be a comprehensive RFR data source for market participants.

Initially, the ICE Term RFR Portal will include:

• Daily one, three and six-month forward-looking term rates for SONIA derived from ICE One Month SONIA Index Futures settlement
• prices and published SONIA rates (ICE Term Risk Free Rate - Forward-Looking Futures Derived - GBP);
• Daily realised simple and compounded averages for one, three and six month tenor periods for each available RFR derived from the
• historical published RFR for the relevant period; and
• the daily RFR for each currency where available for broad market distribution56

Over time, with the required developments in the relevant underlying markets, IBA would like the ICE Term RFR Portal to also include:

• One, three and six-month forward-looking term rates for SONIA derived from SONIA OIS contracts (ICE Term Risk Free Rate - Forward-Looking Swaps Derived - GBP); and
• Forward-looking term rates for the US dollar, Japanese yen, Swiss franc and euro RFRs derived from futures and/or OIS contracts.

The ICE Term RFR Portal will be updated daily at various time intervals based on the release time of the relevant RFRs and the time windows selected for calculating the relevant term RFRs.

IBA is working to develop methodologies which would allow for same-day publication of all term RFRs in the morning in the time zone of the relevant currency area.

The report

The report also provides considerable information about what is happening in the development of new benchmarks, including:

• A brief Introduction to risk free rates
• Development of term risk free rates
• Possible methodologies for constructing term risk free rates
• IBA proposals for term SONIA: ICE term RFR - forward-looking - GBP
• ICE Term RFR - forward-looking - GBP: historical testing.

Feedback needed

IBA is inviting feedback from market participants on the proposed methodologies to derive forward-looking term rates and on the ICE Term RFR Portal. They want to hear from stakeholders on how IBA can enhance its approach in order to support the development and adoption of term risk free rates and make the ICE Term RFR Portal as useful and informative as possible.