Posts in Trading
How will LIBOR options transition?

The process to transition linear derivatives (FRAs, Swaps) to a new RFR rate is now well understood. The issue of the transition of non-linear interest rate products, like options, is slightly more complicated. We can recognise this by observing that option prices are driven by more factors than just the underlying rate. For vanilla options, there are three main factors that drive the price, all of which will affect the fair transition process.

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LIBOR, LIBOR Transition, Regulation, Risk Management, TradingMark TaylorLIBOR, LIBORTransition, FCA, ISDA, Options, Caps, Floors, Swaptions
LIBOR Transition - The Bank issues a Rallying Cry

Andrew Hauser, Executive Director for Markets, spoke at the recent Risk.net LIBOR Telethon. He said that following the announcements of recent weeks and subject to the ICE Benchmark Administration’s consultations, there can be little doubt that the LIBOR panels for sterling, yen, Swiss franc, euro and the less heavily traded dollar tenors will cease at the end of 2021.

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LIBOR, LIBOR Transition, Regulation, Risk Management, TradingPeter ManningLIBORTransition, LIBOR, Bank of England, IBOR, FCAComment
How to best navigate the choppy waters of LIBOR transition

In summary, LIBOR’s days are numbered and conversion to the new benchmarks, like SONIA, is a necessity - this will inevitably and unavoidably bring some challenges for corporates, but there is plenty of skilled assistance available to be called upon as the choppy waters are navigated and the calmer SONIA waters can be reached.

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Regulation, Market Abuse, Risk Management, Trading, LIBOR, LIBOR TransitionIan GaskellLIBOR, Bank of England, Transition, LIBORTransition, Interest Rates, FCA
IBOR Transition Update - ACT Conference

The Association of Corporate Treasurers held an International Treasury Week webinar during May. A session covered market progress on the transition away from IBOR and on to Risk Free Rates (‘RFR’s). Edwin Schooling Latter, Director of Markets and Wholesale Policy gave the Financial Conduct Authority’s update.

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Regulation, Risk Management, TradingPeter ManningFMCRIBOR, LIBOR, Treasury, Corporate, Risk Management, Hedging, Interest Rates
A growing chasm between IBOR and its Replacement Rates

Recently, the gap between IBOR rates and the rates intended to replace them have widened. The new ‘Risk-Free Rates’ (RFRs) are, as the name suggests, (mostly) risk-free, whereas IBOR rates (by design) contain information about bank credit risk. In normal times, this spread is small, but in times of stress the gap between these two benchmarks widens.

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FX, Trading, Risk ManagementMark TaylorFX, trading, Hedging, Risk Management
Senior Managers under-perform compliance on countering Market Abuse.

The FCA has recently completed a review of four key areas in the market abuse systems and controls employed at several market-making firms. The firms were positioned in the small and mid-cap equity market making space but their findings are relevant to most trading firms which undertake a broad range of activities, where conflicts of interest could arise.

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Regulation, Trading, Market AbusePeter ManningMarket Abuse, Senior Managers Regime, trading, FCA