ISDAFIX Now Called ICE Swap Rate, Transitions to New Calculation Methodology | Practical Law

ISDAFIX Now Called ICE Swap Rate, Transitions to New Calculation Methodology | Practical Law

Effective April 1, 2015, the global benchmark for interest rate swaps known as ISDAFIX will be known as ICE Swap Rate. This benchmark will no longer require expert or subjective judgment or panel-bank submissions in its calculation.

ISDAFIX Now Called ICE Swap Rate, Transitions to New Calculation Methodology

Practical Law Legal Update 7-607-7834 (Approx. 3 pages)

ISDAFIX Now Called ICE Swap Rate, Transitions to New Calculation Methodology

by Practical Law Finance
Published on 02 Apr 2015 • USA (National/Federal)
Effective April 1, 2015, the global benchmark for interest rate swaps known as ISDAFIX will be known as ICE Swap Rate. This benchmark will no longer require expert or subjective judgment or panel-bank submissions in its calculation.
The Intercontinental Exchange (ICE) announced that the ICE Benchmark Administration (IBA) has completed the transition to a new method for calculating the global benchmark used in many interest rate swaps and other derivatives transactions. This benchmark rate, formerly known as ISDAFIX, is now:
  • Known as ICE Swap Rate.
  • Calculated from tradable quotes sourced from regulated electronic trading venues that require no expert or subjective judgment or panel-bank submissions. Previously, the calculation was made using a submission-based rate using inputs from panel banks.
These changes are effective April 1, 2015.
Note further that, where ISDAFIX2 was previously used in definitions, that will continue to be the case. Any other references to ISDAFIX should be replaced by ICE Swap Rate.
ICE Swap Rate represents the average mid-market swap rate (for selected maturities at specific times on a daily basis) for three major currencies: Euro, British pound and US dollar. Market participants use the rate as a factor (usually multiplied by the swap's notional amount) in valuation and settlement of derivatives contracts and as a reference rate for floating rate bonds.
IBA took over the role of ISDAFIX administrator from ISDA in August 2014 (see Legal update, ICE Benchmark Administration formally takes over role of ISDAFIX administrator). In changing the methodology for calculating the benchmark rate by discarding the discredited submission-based method, IBA claims it is seeking to improve the robustness and transparency of the benchmark price setting process.