The regulator has announced several initiatives to support the adoption of the Singapore Overnight Rate Average (SORA) as a floating rate benchmark.
The Monetary Authority of Singapore (MAS) on Wednesday said it will issue SORA-based floating rate notes (MAS FRN) on a monthly basis, starting from August 21, 2020, which will provide a pricing reference for SORA cash products and spur hedging activities through the SORA derivatives market.
It will also enhance transparency and data availability on SORA by publishing its key features and calculation methodology, as well as publishing daily key statistics involving SORA, compounded SORA rates for 1-month, 3-month and 6-month tenors, and a SORA Index.
MAS has also prescribed SORA as a financial benchmark under the Securities and Futures Act (SFA) to safeguard the integrity and robustness of SORA, and issued a Statement of Compliance with the IOSCO Principles for Financial Benchmarks (IOSCO Principles) for SORA to boost market confidence for its use.
Growing Importance
«SORA’s growing importance as a key interest rate benchmark in SGD financial markets, these initiatives aim to catalyze greater activity in SORA markets, safeguard the benchmark’s integrity and enhance market confidence in SORA,» MAS said in a statement on Wednesday.
SORA is a transaction-based interest rate benchmark underpinned by the SGD overnight interbank funding market and has been published by MAS since July 2005.
An industry consultation group has recommended the discontinuation of the SGD Singapore Interbank Offered Rates (SIBOR) in three to four years, saying that shifting to SORA will result in more transparent loan market pricing for borrowers, and more efficient risk management for lenders.
