The Monetary Authority of Singapore (MAS) announced four key initiatives on August 5 to support the adoption of the Singapore Overnight Rate Average (SORA).
MAS says the initiatives aim to speed up greater activity in SORA markets, safeguard the benchmark’s integrity, and enhance market confidence in the newly-introduced benchmark rate.
These initiatives will also 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.
MAS will first issue SORA-based floating rate notes (MAS FRN) on a monthly basis, starting from August 21. The notes will broaden MAS’s suite of money market instruments used to manage banking system liquidity.
The notes will also facilitate the adoption of SORA as a floating rate benchmark, providing a pricing reference for cash products using SORA, and boost hedging activities through the SORA derivatives market.
The second initiative will see MAS enhancing transparency and data availability on SORA. The central bank has already published the key features and calculation methodology of SORA previously, and will now publish key statistics involving SORA on a daily basis.
The statistics included in the publication will also include compounded SORA rates for one- to six-month tenors and a SORA index that will facilitate calculation of compounded SORA over specified periods on a daily basis.
The compounded SORA rates and SORA Index will provide market participants with a standardised and transparent basis to derive rates for given tenors, which can be easily referenced in new SORA products.
MAS says it has also prescribed SORA as a financial benchmark under the Securities and Futures Act (SFA) as part of its third initiative to support the adoption of the new benchmark rate. The act will safeguard the integrity and robustness of SORA, and ensure that regulatory and enforcement powers, including criminal and civil actions, can be taken against any market misconduct related to SORA.
Lastly, MAS has issued a Statement of Compliance with the IOSCO Principles for Financial Benchmarks (IOSCO Principles) for SORA. This means that the administration of SORA meets international best practice relating to benchmarks administration, which will generate broader market confidence by both domestic and international market participants in the use of SORA.
“These initiatives mark an important milestone in supporting broad-based adoption of SORA in SGD financial markets. They complement the recently announced industry proposal to shift to a SORA-centred SGD interest rate market, by enhancing the robustness of SORA and supporting the development of deep, liquid and efficient SORA markets,” says Jacqueline Loh, deputy managing director at MAS.
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