Asian Options – IQ September 2020

Both Brexit and benchmark reform emerged as headline issues relatively close together – June 2016 for the Brexit referendum and July 2017 when the UK Financial Conduct Authority revealed that LIBOR might not exist after the end of 2021. They are now also approaching their denouement in lockstep: both will require a big push by firms in the remaining months of 2020 in order to be ready for the changes they will bring in 2021 and beyond.

In this issue of IQ, we pick up on both of those topics. As part of our cover package focusing on Asia-Pacific, we explore the progress firms in the region have made on LIBOR transition, as well as efforts to build liquidity in alternatives to local interbank offered rates (IBORs). As big users of LIBOR, Asian institutions have large legacy exposures – and, as some regulators in the region are warning, prompt action is needed now to deal with them.

The rollout of new, robust fallbacks will help reduce the systemic disruption that would likely occur in the event an IBOR ceases to exist, and ISDA will shortly publish a supplement and protocol to incorporate fallbacks into derivatives contracts that reference key IBORs. According to a statement from the ISDA board of directors in July, the protocol will be the “most efficient way for participants in the vast majority of non-cleared derivatives markets to mitigate against the risks associated with the discontinuation of a key IBOR”.

When it comes to Brexit, one of the open questions relates to disputes on derivatives transactions where the parties have opted for their ISDA Master Agreement to be governed by English law and subject to the jurisdiction of English courts. Specifically, there is still some uncertainty over the recognition and enforcement of English court judgements in Europe after the end of the Brexit transition period on December 31, 2020.

In this issue, we look at this question from a variety of perspectives. As well as an analysis of possible scenarios for how European states will treat English court jurisdiction clauses and judgements post-transition, we also begin a series of articles exploring the options derivatives participants have for the resolution of disputes.

Whether ramping up LIBOR transition efforts, implementing new fallbacks or exploring the impact of different scenarios after the Brexit transition period, much of the hard work and preparation needs to occur now. To support members, ISDA will continue to publish information and analysis on its website (www.isda.org/fallbacks, www.isda.org/tag/brexit), and, where possible, develop industry solutions to ease implementation challenges.

Click on the attached PDF to read the full issue.

Documents (1) for Asian Options – IQ September 2020

Key IRD Trends from BIS 2025 Survey

This paper highlights changes in over-the-counter (OTC) interest rate derivatives (IRD) markets between April 2022 and April 2025, based on data from the Bank for International Settlements (BIS) Triennial Central Bank Survey. The survey provides a comprehensive view of global...

RMB IRD Growth in Mainland China & Hong Kong

This report analyzes interest rate derivatives (IRD) activity in mainland China and Hong Kong, with a particular focus on renminbi (RMB)-denominated IRD. It examines market growth, structure and integration across onshore and offshore centers, and places these developments within the...