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26.09.2017 Investors

SARON® as the future CHF-alternative to LIBOR

At an event of SIX Swiss Exchange, the international reform process, the initial situation of Switzerland and a concrete solution were discussed.

At the end of July 2017, the UK Financial Conduct Authority (FCA) announced to persuade the panel banks no longer than the end of 2021 to submit the rates for the London Interbank Offered Rate (LIBOR). This announcement from the regulator of the key international interest rate highlighted the dwindling trust in LIBOR and proposed an orderly transition to alternative reference interest rates. This now assumes a new urgency in the search for a suitable follow-up solution

Reform process advancing worldwide

In Switzerland, a national working group on the topic of CHF reference interest rates was set up back in 2013. Similar working groups have been formed for other LIBOR currencies, such as the USD, GBP and JPY. Their main task is to assess alternative solutions for existing reference rates. The working group in Switzerland has already analyzed and evaluated various approaches and benchmarks. Its findings from the last four years as well as an outlook on further actions were presented on Friday, 22 September 2017, to the roughly 250 participants of the joint event staged by SIX Swiss Exchange and the SFAA Swiss Bond Commission in Zurich.

  • First of all, Dewet Moser, an Alternate Member of the SNB's Governing Board and initiator of the national working group, provided an update on the internationally coordinated reform process and the significance of the reference interest rates from the central bank's perspective.
  • Darrell Duffie, Professor of Finance at Stanford University and member of the scientific council of the Swiss Finance Institute, then explained why LIBOR had to be replaced and what role Switzerland could play in the replacement process.
  • Martin Bardenhewer, co-chairman of the national working group, outlined the working group's developments since its foundation, the factors underlying the focus on SARON and the steps to be taken now.

All presentations are available as webcasts and PDF-downloads.



After the presentations, Martin Bardenhewer, Dewet Moser and Darrell Duffie answered questions from the audience.

Convincing arguments in favor of SARON

The Swiss Average Rate Overnight, or SARON in short, is a Swiss stock exchange index that was launched in 2009 in conjunction with the SNB as an alternative reference interest rate for the CHF market. It is based on actual market transactions and prices in the Swiss repo market and thus on secured assets. The unsecured counterpart in the Swiss money market is TOIS-fixing. Like LIBOR, TOIS-fixing is calculated based on reports from banks. For this purpose, the panel banks determines the rates at which they can borrow money from other institutions on an unsecured basis. Both in Switzerland and abroad, unsecured transactions have become less common. This makes the determination of the LIBOR and the TOIS-fixing in comparison to the transaction-based SARON not sustainable. A first measure will be taken therefore in the Swiss money market at the end of 2017, when the TOIS-fixing will be replaced by SARON.


Why SARON is a real alternative to the CHF-LIBOR:
  • The SARON index[pdf] is based on actual market transactions and quotes made on the regulated trading platform SIX Repo during the day.
  • SARON is calculated transparently in accordance with the Index Regulations[pdf], which are available on the SIX Swiss Exchange website.
  • Index data can be obtained via all standard data vendors or directly from SIX Swiss Exchange. The intraday data (e.g. Fixings) is subject to licensing from 1 January 2018. At the same time, the historic data will be available free of charge on the website of SIX Swiss Exchange.
  • SIX Swiss Exchange uses the IOSCO Principles for Financial Benchmarks for all indices. SARON thus complies with international benchmark standards.
  • Additionally, support is available from the advisory Swiss Reference Rates Index Commission, comprising market representatives.
  • Furthermore, two major clearing houses have announced to offer the clearing of SARON swaps.

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