Derivatives
trading on the Sterling Overnight Index Average (SONIA) reached a new height of
1.37 million futures and options contracts on May 24, International Exchange
(ICE) said on Friday. SONIA is a benchmark interest rate
for short-term unsecured lending in the United Kingdom.
The new
record beats a previous peak of 1.147 million SONIA futures and options
contracts traded on February 2, 2023.
UK Investors Count on Higher Rates
ICE, a
global exchange and clearing house operator, explained that the new peak
performance builds on adjustments made by investors who have adjusted their
exposure to the benchmark “for the potential of higher interest rates to
continue for longer in the UK.” The change in exposure is a reaction to the
latest UK inflation data which made investors review their expectations for
interest rate changes.
“On May 24,
2023, over 1 million SONIA futures traded, with high levels of activity in the
June, September and December 2023 SONIA contract months,” ICE explained. “Open
interest across SONIA futures and options is 2.6 million contracts, up 28% since
the start of the year, with open interest out to December 2028.”
SONIA
Trading Outpaces February High
The
previous record trading in SONIA futures and options achieved on February 2 was
driven by investors’ return to
the UK markets. It
“reflects a return of confidence by investors to UK interest rate markets
following the impact of the mini-budget in 2022,” ICE explained.
Under the
old record, ICE posted a record 979,561 SONIA futures contracts, which was a
19% increase from the prior record.
“As the
benchmark for pricing and risk managing UK interest rate risk, SONIA futures
and options markets are benefiting from the measures taken last year to bolster
liquidity,” Chris Rhodes, President of ICE Futures Europe, previously
explained. “The record volumes, together with the growth in Euribor volumes
over the past year, are creating an exciting European rates environment for
traders.”
Meanwhile,
options and futures trading on the Euro Interbank Offer Rate (Euribor) recently
hit a 10-year peak with a record 49.5 million contracts traded
in March 2023. Euribor is the reference rate used by banks in the eurozone to
offer short-term euro-denominated loans at the interbank market.
This article was written by Solomon Oladipupo at www.financemagnates.com.
