Icap has launched a euro interest rates swap index, the first in a series of new product launches which marks a strategic move by the interdealer-broker to expand its benchmarks business.
The Icap Euro Interest Rate Swap Index will be published in maturities from one to 30 years and track prices from the broker’s voice and hybrid electronic platforms. ICAP is in discussion with potential users including structurers, ETF providers and asset managers, it said.
“We want this to be the most comprehensive, liquid, powerful swap index in the world,” said Jan De Smedt, global head of indices at Icap Information services. “As the world’s leading interest rate swap broker we are in a unique position to seize this opportunity and make use of our data to launch this new benchmark.”
The business will not detract from Icap’s commitment to brokerage activities, De Smedt said. Icap has a 40% to 50% share of the European interdealer swap market, according to its own estimates.
The index aggregates three legs of swaps spreads; overnight Eonia versus three-month Euribor, three-month Euribor swapped into six month Euribor and six month Euribor against a fixed rate. The index will be provided in real time between 8am and 4.30pm London time.
ICAP said in launching the index it has been in close cooperation with the UK regulator and had based its development on the Iosco Principles for Financial Benchmarks.
Icap’s expanding index business represents something of a new beginning for the broker, which has attracted negative headlines over its involvement in allegations relating to manipulation of the IsdaFix benchmark (now administered by ICE Benchmark Administration as ICE Swap Rate), the Libor rate that underpins some US$300trn of derivatives and a European Commission investigation into yen money markets.
The move comes as a number of index businesses scale back activities due to the impact of increasing regulatory and operational costs following the Libor scandal.
HSBC in 2013 sold its index business to Euromoney. Barclays, meanwhile, is said to be in renewed negotiations to offload its portfolio of 98 major indexes, many of which were acquired as part of its takeover of Lehman Brothers. Barclays put its Index, Portfolio and Risk Solutions business up for sale after receiving interest from MSCI and other companies. However, it struggled to complete after would-be buyers realised some crucial bond pricing data that does not belong to the UK bank will not be part of the package.
On the back of the new interest rate swap index, Icap plans a series of new benchmarks over the coming months, it said. Those may include a sterling repo index as well as sterling and dollar versions of the interest rate swap index.