MAS Unveils SORA Transition Support

The Monetary Authority of Singapore (MAS) has announced several initiatives to support the adoption of the Singapore Overnight Rate Average (Sora), which is administered by MAS.

Given Sora’s growing importance as a key interest rate benchmark in Singapore dollar financial markets, MAS explains the initiatives aim to catalyse greater activity in Sora markets, safeguard the benchmark’s integrity and enhance market confidence in it. “They complement the industry-led transition roadmap, set out by the Steering Committee for Sor Transition to Sora, to develop vibrant and robust Sora markets,” MAS says.

First, MAS will issue Sora -based floating rate notes on a monthly basis, starting from 21 August 2020. This will, MAS says, broaden its suite of money market instruments used to manage banking system liquidity and 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.

Second, MAS will enhance transparency and data availability on Sora. It has published the key features and calculation methodology of Sora, and will also publish, on a daily basis, key statistics involving Sora, including compounded Sora rates for 1-month, 3-month 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 standardised and transparent basis to derive rates for given tenors, which can be easily referenced in new Sora products,” MAS states.

Third, MAS has prescribed Sora as a financial benchmark under the Securities and Futures Act (SFA).  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 SFA will safeguard its integrity and robustness, given its growing role as a key interest rate benchmark for Singapore dollar financial markets,” MAS says.

Finally, MAS has issued a Statement of Compliance with the IOSCO Principles for Financial Benchmarks for the new rate. 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 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,” says Jacqueline Loh, deputy managing director, MAS. “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.”

Colin Lambert

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