The Transition to Risk-free Rates (RFRs) Review analyzes the trading volumes of over-the-counter (OTC) and exchange-traded interest rate derivatives (IRD) that reference the selected alternative RFRs, including the Secured Overnight Financing Rate (SOFR), the Sterling Overnight Index Average (SONIA), the Swiss Average Rate Overnight, the Tokyo Overnight Average Rate, the Euro Short-Term Rate and the Australian Overnight Index Average.
Key highlights for the third quarter of 2020 include:
The ISDA-Clarus RFR Adoption Indicator, which tracks how much global trading activity (as measured by DV01) is conducted in cleared OTC and exchange-traded IRD that reference the identified RFRs in six major currencies, was at 7.7% in the third quarter of 2020, compared to 4.5% the prior quarter.
Global RFR-linked IRD traded notional accounted for 10.4% of total IRD traded notional in the third quarter of 2020, compared to 5.9% in the prior quarter.
Based on US trading data, RFR transactions accounted for 8.5% of IRD traded notional in the third quarter of 2020, compared to 4.5% in the prior quarter.
Based on US trading data, IRD traded notional referencing SOFR increased by 8.8% to $228.0 billion in the third quarter of 2020 from $209.6 billion in the prior quarter. IRD traded notional referencing SONIA increased by 56.1% and totaled $3.6 trillion in the third quarter of 2020, compared with $2.3 trillion in the second quarter of 2020.