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 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 first half of 2021 include:
The average monthly 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, increased to 10.2% in the first half of 2021 compared to 6.5% in the first half of 2020.
Global RFR-linked IRD traded notional accounted for 10.9% of total IRD traded notional compared to 7.4% in the first half of 2020.
Based on US trading data, traded notional of OTC IRD referencing alternative RFRs decreased by 15.9% to $9.2 trillion in the first half of 2021 compared to $10.9 trillion in the first half of 2020.
Based on US trading data, IRD traded notional referencing SOFR increased to $1.7 trillion from $488.6 billion in the first half of 2020. The proportion of IRD traded notional linked to SOFR remained small, accounting for only 1.4% of total IRD traded notional.