MAS announced several initiatives to support adoption of the Singapore Overnight Rate Average (SORA), which is administered by MAS. These initiatives complement the industry-led transition roadmap, set out by the Steering Committee for SOR Transition to SORA (SC-STS), to develop vibrant and robust SORA markets. Given the growing importance of SORA as a key interest rate benchmark in SGD financial markets, these initiatives aim to catalyze greater activity in SORA markets, safeguard integrity of the benchmark, and enhance market confidence in SORA.
MAS announced the following initiatives with respect to SORA:
- MAS will issue SORA-based floating rate notes on a monthly basis, starting from August 21, 2020. This will broaden MAS’ suite of money market instruments used to manage banking system liquidity. It will also facilitate the adoption of SORA as a floating rate benchmark, provide a pricing reference for SORA cash products , and spur hedging activities through the SORA derivatives market.
- MAS will enhance transparency and data availability on SORA. MAS has already published the key features and calculation methodology for SORA. MAS will also publish, on a daily basis, the key statistics involving SORA; the Compounded SORA rates for 1-month, 3-monthm and 6-month tenors; and a SORA Index that will facilitate calculation of Compounded SORA over specified periods. The Compounded SORA rates and SORA Index will provide market participants with a standardized and transparent basis to derive rates for given tenors, which can be easily referenced in new SORA products.
- MAS prescribed SORA as a financial benchmark under the Securities and Futures Act. This will ensure that regulatory and enforcement powers, including criminal and civil actions, can be taken against any market misconduct related to SORA. Prescribing SORA as a financial benchmark under the Securities and Futures Act will safeguard the integrity and robustness of SORA, given its growing role as a key interest rate benchmark for SGD financial markets.
- MAS issued a statement of compliance with the IOSCO principles for financial benchmarks for SORA. This follows recent enhancements to the methodology of SORA to broaden its representativeness. Compliance with IOSCO principles means that the administration of SORA meets international best practices for administration of benchmarks, thus potentially generating broader market confidence in the use of SORA by both domestic and international market participants.
Keywords: Asia Pacific, Singapore, Banking, Securities, SORA, Interest Rate Benchmarks, Benchmark Reforms, IBOR Reform, Derivatives, MAS
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