TraditionDATA, the data arm of Compagnie Financière Tradition (“Tradition”) announced that it has integrated AMERIBOR®, the new credit-sensitive interest rate benchmark created by the American Financial Exchange (AFX), as one of the US Dollar alternative reference rates (ARRs) in its market-leading product set.
TraditionDATA will publish spreads between AMERIBOR, Secured Overnight Financing Rate (SOFR) and the Effective Fed Funds Rate (EFFR) via its own data feeds as well as through select vendors including Refinitiv and Bloomberg.
The publication of these spreads will commence in early September and comes at a time when the global financial markets are focused on the retirement of the historic London Interbank Offered Rate (LIBOR) and other global IBORs with new alternative reference rates (ARRs).
In the United States, the focus has been on the Secured Overnight Financing Rate (SOFR), a benchmark interest rate for dollar-denominated derivatives and loans that many expect to replace LIBOR. SOFR is based on transactions in the Treasury repurchase market, and is seen as preferable to LIBOR since it is based on data from observable transactions rather than LIBOR’s estimated borrowing rates.
However, SOFR is a Risk-Free Rate (RFR) as it does not have the credit component that was embedded in LIBOR. Beyond the US, other countries have put forward their own ARRs, such as SONIA in the UK and ESTR in the EU.
“Properly managing the transition away from LIBOR is integral to the financial markets and the economy. Tradition is positioned at the heart of these markets giving us the opportunity to provide data and information to those who need it,” said Jeffrey Maron, TraditionDATA’s Global Head of Product.
“Our inclusion of AMERIBOR, which contains a credit component, unlike SOFR, brings another dimension to our global set of RFR/ARR data solutions. It demonstrates that we are looking at this market shift from every perspective and are representing a broad set of participants including corporate treasurers, regional banks, asset managers and systemically important institutions. As this transition takes effect, the markets will not only decide how that happens, but spread markets between the various solutions will evolve and our clients will need a reference point for this valuable price information.”
Following a written question in a hearing of the US Senate Banking Committee, Federal Reserve Chairman Jerome Powell wrote that “…[AMERIBOR] is a fully appropriate rate for the banks that fund themselves through the American Financial Exchange (AFX) or for other similar institutions for whom AMERIBOR may reflect their cost of funding.”
Dr Richard Sandor, Founder of the American Financial Exchange and creator of AMERIBOR, said: “We are excited that Tradition is adding AMERIBOR to its roster of spreads and product offerings. In addition to other initiatives we have run, AMERIBOR’s data availability through Tradition will also enable development and increased use of AMERIBOR in a variety of financial products.”
