ICAP agrees to delay ending federal funds open rate
02 June 2016 New York
Image: Shutterstock
ICAP has agreed to delay ditching the federal funds open (FFO) rate at the request of associations that were worried their members were not given enough time to adjust to its replacement.
The Risk Management Association (RMA) and Securities Industry and Financial Markets Association (SIFMA) confirmed today (2 June) that the FFO rate would not be discontinued until 30 September to avoid possible market disruption during the change over to its replacement.
ICAP originally planned to drop the benchmark for pricing and performance reporting on 27 July, a move which the RMA and SIFMA backed because the Federal Reserve Bank of New York’s new overnight bank funding rate (OBFR) would better address the benchmark standards recommended by the International Organization of Securities Commissions.
Commenting on the delay, Fran Garritt, director of securities lending and market risk at the RMA, said: “Considering the wide use of FFO in various trading strategies including securities lending, margin lending, and swaps, it makes sense for the industry to work towards a non-disruptive implementation time frame that will allow for all market participants to understand any changes."
"We believe that this extra time will allow the industry to achieve this goal.”
SIFMA associate general counsel Rob Toomey added: “We believe clarity around the industry incorporation of OBFR is important to minimise disruption and meet the expectations of all market participants and we hope the associations’ recommendations and further work over the next few months will ensure a smooth changeover.”
The Risk Management Association (RMA) and Securities Industry and Financial Markets Association (SIFMA) confirmed today (2 June) that the FFO rate would not be discontinued until 30 September to avoid possible market disruption during the change over to its replacement.
ICAP originally planned to drop the benchmark for pricing and performance reporting on 27 July, a move which the RMA and SIFMA backed because the Federal Reserve Bank of New York’s new overnight bank funding rate (OBFR) would better address the benchmark standards recommended by the International Organization of Securities Commissions.
Commenting on the delay, Fran Garritt, director of securities lending and market risk at the RMA, said: “Considering the wide use of FFO in various trading strategies including securities lending, margin lending, and swaps, it makes sense for the industry to work towards a non-disruptive implementation time frame that will allow for all market participants to understand any changes."
"We believe that this extra time will allow the industry to achieve this goal.”
SIFMA associate general counsel Rob Toomey added: “We believe clarity around the industry incorporation of OBFR is important to minimise disruption and meet the expectations of all market participants and we hope the associations’ recommendations and further work over the next few months will ensure a smooth changeover.”
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