Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of data, technology and market infrastructure, today announced that ICE Benchmark Administration Limited (“IBA”) has launched ICE SONIA Indexes for use by licensees, following a successful testing period.
ICE SONIA Indexes have been developed to support the needs of the UK lending market as it transitions to SONIA, and are designed to provide a simple method for parties to calculate SONIA compound interest between any two dates and agree on their associated interest accruals.
The Indexes expand IBA’s SONIA-based solutions offering and are available to licensees alongside ICE Term SONIA Reference Rates (ICE TSRR). ICE TSRR were launched as a benchmark in January 2021 to provide businesses, borrowers and lenders with a forward-looking, term SONIA benchmark to provide certainty when calculating their interest expenses and other contractual payments in advance.
As described in the whitepaper, ICE SONIA Indexes provide a daily value that represents accrued, compound SONIA interest relative to the first day value of 100 on April 23, 2018 – the date when the Bank of England began publishing reformed SONIA.
ICE SONIA Indexes include the option to add a 0% floor to address potential negative interest rates in the future, and a lag where parties can agree to use a time-shifted view of SONIA. Lookbacks help manage cash flows and address operational issues associated with the determination of payments on loans before the end of a loan accrual period or loan term. To facilitate accounting for loan accruals on reporting dates that are not business days, the ICE SONIA Indexes provide values for every calendar day.
“To have a standardized set of compound SONIA indexes that everyone in the whole market can point to, published by IBA and suitable for use in contracts, is something that UK lending markets need and will be extremely helpful in discussions with borrowers,” said Phil Lloyd, head of market structure and regulatory customer engagement at NatWest Markets.
“The combination of ICE SONIA Indexes and ICE Term SONIA Reference Rates constitute a really powerful set of tools for UK lenders and borrowers in their transition to SONIA-based lending,” said Tim Bowler, President of ICE Benchmark Administration. “With a term SONIA benchmark to allow the measurement of forward-looking SONIA rates over tenor periods ranging from one to 12 months, and a range of SONIA indices to enable flexibility in calculating compound interest accruals, the market has the means to facilitate the whole spectrum of SONIA-based calculation and decision making in UK lending markets.”
ICE SONIA Indexes are published daily at or around 9:30am London time. ICE TSRR are published daily at or around 11:55am London time. Prospective licensees should contact IBA-CommercialTeam-Info@ice.com for further information on ICE SONIA Indexes and ICE TSRR.
