For further information contact:
Milton Bellis, ISDA/New York, (212)332-1202


ROME, Wednesday, March 25, 1998 -- The International Swaps and Derivatives Association (ISDA) announced at its annual meeting here that it will inaugurate in April a par rate screen service to provide mid-market swap rates and dollar spreads to dealers and users. The service will be operated by Reuters PLC and Intercapital Brokers Limited with swap rates and spreads provided by 23 of the world's leading derivatives dealers.

Described as another step by the swaps industry to increase transparency and price certainty for dealers and end-users in the growing market for privately negotiated derivatives, the new benchmark series will provide a par swap curve from independently calculated reference values for cash-settled swap options quoted by acknowledged market makers as of 11:00 a.m. local time in London and New York, and at 10:00 a.m. and 3:00 p.m. local time in Japan. The rates will be displayed about one-half hour later on a Reuters screen each business day after Reuters and Intercapital collect the reference bank rates from 10 quoting dealers for each currency in Europe, the United States and Japan.

Reuters will also display secondary screens showing the rates and spreads reported by each quoting dealer, and ISDA will maintain an archive of these secondary screens.

Initially covering mid-market swap rates for four currencies in maturities of 1 through 10 years -- French francs, Deutschemarks, Japanese yen and U.S. dollars -- the midmarket prices will appear on the Reuters ISDAFIX pages. For transactions in U.S. dollars, swap spreads as well as rates will be posted in maturities of 2, 3, 5, 7 and 10 years.

The new service was developed over the past year in meetings organized by ISDA's market practice committee representing the dealer community in New York and London. Its primary purpose is to establish authoritative values against which exercised swap options can be settled as well as to serve other valuation needs, for example the cash settling of interest rate swaps.

ISDA said that the rates and spreads provided by each quoting dealer will be the mean of what an acknowledged dealer of good credit in the market would itself offer and bid a swap in the relevant maturity for a national equivalent amount of US$50 million or other amount deemed to be market size in that currency for that tenor.

In conjunction with the introduction, ISDA said its forthcoming "1998 Supplement to the 1991 ISDA Definitions" will include the ISDA screen rates as a price source and provide standardized language to designate a cash settlement methodology, either zero coupon or par coupon, for cash settled swaptions.

Rates and spreads will be fixed as of the designated local times by polling ten designated dealers, eliminating the highest and lowest quotes and averaging the remaining ones to three decimal places. Only in the unlikely event that four or fewer quotes are received will no rate or spread be published for that day. The polling will be conducted by Intercapital Brokers in Europe and by Reuters in Japan and the United States. The results will appear on the screens as soon as possible after the polling, estimated to be around 30 minutes. To get closer to real time posting, Reuters is in the developing stage of an electronic interface with quoting dealers to replace telephone polling.

Reuters and Intercapital said they were willing to share the ISDA screens with other carriers that help defray operating costs.

Daycount conventions for which the rate and spread will be posted have been set as follows:
French Franc Annual 30/360 vs. 3-month PIBOR
Deutschemark Annual 30/360 vs. 6-month LIBOR
Except for one-year tenors which will be quoted as Annual 30/360 vs. 3-month LIBOR
Japanese Yen Semiannual Act/365 vs. 6-month LIBOR
Except for one-year tenors which will be quoted as Annual 30/360 vs. 3-month LIBOR
U.S. Dollar Semiannual 30/360 vs. 3-month LIBOR

For the U.S. dollar spreads, quoting institutions will be required to indicate the U.S. Treasury issue against which the quoted spread is benchmarked. For the seven-year spread quotation, the benchmark will be the straightline interpolation between the five-year and 10-year benchmarks.

The ten quoting dealer institutions asked to participate for each of the initial four currencies are:

  • German Deutschemark:
    Chase Manhattan Bank J.P. Morgan & Co.
    Commerz Financial Products NatWest
    Credit Suisse Financial Products SBC Warburg
    Deutsche Morgan Grenfell Societe Generale
    Dresdner Kleinwort Benson Union Bank of Switzerland
  • French Franc
    Credit Agricole Indosuez Citibank, N.A.
    Banque Paribas Deutsche Morgan Grenfell
    Banque National de Paris Goldman, Sachs & Co.
    Credit Commercial de France J.P. Morgan & Co.
    Credit Suisse Financial Products Societe Generale
  • U.S. Dollar
    Bankers Trust Goldman, Sachs & Co.
    Chase Manhattan Bank J.P. Morgan & Co.
    Citibank, N.A. Merrill Lynch & Co.
    Credit Suisse Financial Products Morgan Stanley
    Fuji Capital Markets SBC Warburg
  • Japanese Yen
    Bank of Tokyo-Mitsubishi, Ltd. Industrial Bank of Japan, Ltd.
    Chase Manhattan Bank J.P. Morgan & Co.
    Citibank, N.A. Merrill Lynch & Co.
    Credit Suisse Financial Products Sanwa Bank Ltd.
    Fuji Capital Markets Societe Generale

ISDA is the industry association for the world's leading participants in swaps and other privately negotiated derivatives transactions. The association's members include banks and other financial institutions, government entities, corporations and professional service providers.

Intercapital Brokers, part of the Intercapital Group, provides broking service in interest rate swaps and options and other products from its offices in London and New York and through two joint ventures in Tokyo.

Reuters supplies some 435,000 clients worldwide with real-time financial data, transaction and information management systems, databases, news, graphics, photos and news video.