The International Swaps and Derivatives Association, Inc. (ISDA) today published an Invitation to Tender for the role of benchmark administrator for ISDAFIX rates. The tender is the latest step in ISDA’s process to align ISDAFIX with evolving best practices in the setting of benchmark rates by establishing a fully automated rate-setting process.
The successful tenderer will become the new benchmark administrator and calculation agent for ISDAFIX benchmark rates, responsible for:
· Governance of all ISDAFIX administrative processes including oversight and decisions of methodology, systems and controls;
· Daily operations, including collection of input data and calculation of ISDAFIX rates;
· Ex-ante and ex-post checks on submissions to ensure the integrity of the benchmark.
Those firms interested in submitting a tender should contact Catherine Farrer at cfarrer@isda.org byFebruary 28, 2014 to receive the Invitation to Tender document. The deadline to submit a tender response isMarch 21, 2014. ISDA expects to announce the successful bidder by the end of April 2014. ISDA will continue to support the ISDAFIX benchmark during the transition to a new administrator to ensure continuity and minimize disruption for market participants.
The tender process follows a number of important changes made to the submission methodology process last month, including a standardization of the polling process across currencies. The appointment of the new benchmark administrator will coincide with the next phase of development: moving from the current bank submission-based method to an automated model that utilizes live, executable prices from multilateral trading facilities (MTFs).
The target for the transition to a MTF-based approach is the second quarter of this year for euroswaps, with the US dollar and sterling swaps following by the end of 2014.
The changes to ISDAFIX have been spearheaded by the ISDA Benchmark Committee. The committee was formed to develop strategy and policy recommendations for the ISDA Board regarding interest rate benchmarks with which ISDA is directly involved or which will have an impact on ISDA members, over-the-counter (OTC) derivatives markets, or new and legacy OTC derivative transactions. ISDA arranged for the consulting firm Oliver Wyman to help the committee strengthen the process, governance and controls for the existing ISDAFIX framework and to help develop the MTF-based approach.
In addition to the work to improve the ISDAFIX process, ISDA is also assisting with benchmark reforms on a broader level. Furthermore, ISDA Chairman Stephen O’Connor serves as vice-chairman of the Financial Stability Board’s Market Participants Group (MPG).
