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 first half of 2022 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 40.7% compared to 22.8% in the second half of 2021.
Global RFR-linked IRD traded notional accounted for 32.4% of total IRD traded notional in the first half of 2022 versus 16.4% in the second half of 2021.
Based on US trading data, traded notional of OTC IRD referencing alternative RFRs grew to $56.9 trillion in the first half of 2022 compared to $24.9 trillion in the second half of 2021. RFR transactions accounted for 36.0% of total OTC IRD traded notional, up from 22.5% in the second half of 2021.
Based on US trading data, IRD traded notional referencing SOFR increased to $25.8 trillion in the first half of 2022 versus $7.7 trillion in the second half of 2021. SOFR transactions accounted for 33.2% of US dollar-denominated OTC IRD traded notional compared to 13.1% in the second half of 2021.