BOE Seeks Feedback on Sonia Benchmark Proposals Amid Overhaul

  • Central bank requests responses to plans by end of year
  • Benchmark reforms to be implemented by fourth quarter 2017

The Bank of England is seeking feedback on its proposals to overhaul a U.K. benchmark measure of overnight funding rates as officials seek to prevent a recurrence of the rigging scandals since the global financial crisis.

Officials aim to reform the Sterling Overnight Index Average, or Sonia, by improving the collection of data and broadening the range of transactions underpinning it. The BOE wants responses to its latest consultation by year end and plans to move the benchmark to its new basis in the fourth quarter of 2017.

After reviewing Sonia’s methodology, the central bank said it’s proposing “one important change” -- it will switch to measuring the average rate using a volume-weighted median, rather than a volume-weighted mean.

“The bank is not, however, proposing to make any further changes to the characteristics of SONIA-eligible trades, beyond the inclusion of bilateral trades,” it said. “They will remain: same-day settled, overnight maturity trades, with a minimum size of 25 million pounds and conducted between midnight and 18:00 each London business day.”

The changes are part of a package of measures to reform benchmarks and attempt to hold more individuals to account following the rigging of the benchmark Libor rate and manipulation in currency markets. The central bank said in April that it would provide oversight and governance for Sonia, with the Wholesale Market Brokers’ Association continuing to calculate and publish the gauge.

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