FTSE Russell has been partnering with Inter-dealer brokers and Euroclear to demonstrate a prototype secured overnight rate based upon cleared and uncleared repo transactions. The rate, to be known as £SONET (sterling secured overnight executed transactions), is one of a number of rates being evaluated by the Working Group on Sterling Risk Free Reference Rates set up by the Bank of England. The Working Group was set up in response to the July 2014 Financial Stability Board’s report on reforming major interest rate benchmarks in the light of the LIBOR scandal and is tasked with identifying an alternative nearly risk-free rate which would represent best practice for use in certain new derivative and other contracts. An indicative £SONET rate will be made available in March 2017.
The £SONET team has worked closely with the Working Group to refine and develop the £SONET rate. A summary of £SONET and the work undertaken can be found here. Please note that the rate as described in the presentation demonstrates the properties and characteristics of a rate based on cleared and uncleared repo transactions with a maturity of one business day. FTSE Russell would encourage potential users of £SONET to contact us with any feedback or thoughts.