August 1, 2018 / 4:48 PM / 19 days ago

ICE plans futures on euro, Swiss franc "risk-free" benchmarks

LONDON, Aug 1 (Reuters) - The Intercontinental Exchange has said it will offer futures contracts based on the euro zone’s new “risk free” interest rate benchmark - once the market agrees on one.

Central banks are prodding markets to replace Libor and sister benchmarks like Euribor in the euro zone with “risk free” alternatives based on market transactions.

Banks were fined billions of dollars for trying to rig the benchmarks, used to price trillions of dollars in financial contracts.

But transactions are considered by central banks to be harder to rig than the quotes banks submit for compiling Libor variants and Euribor.

“ICE intends to offer futures on Euro and Swiss Franc alternative risk free interest rates once the underlying benchmarks on these currencies become available,” the exchange said in a statement on Wednesday.

Futures contracts will help markets transition to new risk free rates.

This autumn euro zone market participants aim to agree on a risk-free rate from a choice of three, including ESTER, which will be published by the European Central Bank.

ICE will likely face competition from rival exchange Eurex in offering futures contracts.

Last year a panel of experts proposed using the SARON overnight rate as the “risk free” alternative to Swiss franc-denominated Libor.

Market participants are debating what a futures contract based on SARON could look like.

ICE also said its European arm will offer one-month and three-month futures contracts based on the new SOFR risk free rate published by the Fed from October.

It has already launched futures in the Bank of England’s risk-free rate SONIA, competing with the London Stock Exchange .

“ICE’s SONIA futures continue to see growth with more than 60,000 contracts traded since launch, representing around 128 billion pounds notional value,” it said. (Reporting by Huw Jones; Editing by Hugh Lawson)

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