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, 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 full year 2021 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, increased to a monthly average of 16.4% compared to 7.5% in 2020.
Global RFR-linked IRD traded notional accounted for 13.6% of total IRD traded notional versus 8.8% in 2020.
Based on US trading data, traded notional of OTC IRD referencing alternative RFRs increased by 82.8% to $34.1 trillion compared to $18.7 trillion in 2020.
Based on US trading data, IRD traded notional referencing SOFR increased to $9.4 trillion from $1.3 trillion in 2020. The rise was primarily driven by the SOFR First initiative that started for linear derivatives on July 26, 2021.