LCH extends central clearing of SORA derivatives to 21 years

The Monetary Authority of Singapore is set to extend the tenor of daily SORA derivatives to 20 years.

The LCH Group is extending the central clearing of over-the-counter Singapore Overnight Rate Average (SORA ) transactions from 5.5 years to 21 years. This is one of the first Asian currencies cleared by the international clearing house.

The longer tenor is expected to promote more liquidity across all tenors in SORA Overnight Index Swaps, and basis swaps between SORA and the Swap Offer Rate (SOR).

“This is a keenly awaited milestone that will enable the Committee to roll out a series of key initiatives planned for in 2021 to further deepen SORA markets. Alongside the Committee’s guidance to the market to cease new issuance of SOR cash products from end-April 2021, we expect liquidity in SORA cash and derivatives products to accelerate in the coming months,” Daniel Koh, chair of the Streeing Committee for SOR & SIBOR Transition to SORA, said in a joint statement with the Association fo Banks in Singapore.

SORA derivatives turnover has increased since the second quarter of 2020 by almost tenfold. Expecting more transition to SORA from SOR in the coming months, banks are rearing to support the increased dclient demand for longer-tenor derivative hedges.