13 June 2022
Publication of Beta Efterm® Rates and consultation on fallback rates methodology
The European Money Markets Institute (EMMI) has today started to publish a beta version of its first EURIBOR fallback rate. This rate, EFTERM® (Euro Forward Looking Term Rate), is a forward-looking term rate, based on available market data on Overnight Indexed Swaps that reference the European Central Bank's Euro Short Term Rate (€STR). EFTERM® is designed to measure the average expected €STR rates over the standard EURIBOR® tenors 1 week, 1 month, 3 months, 6 months and 12 months. Once live, EFTERM® will help EURIBOR® users to comply with their obligations under the EU Benchmarks Regulation, which requires supervised entities to nominate an alternative benchmark, where feasible and appropriate, for the event the benchmark they use materially changes or ceases to exist. The Euro Risk Free Rates Working Group has recommended a forward-looking term rate as a fallback for EURIBOR® for certain asset classes. Going forward, EMMI will assess the development of additional fallback rates to address further recommendations by the Working Group and to facilitate regulatory compliance for its EURIBOR® users.
The European Money Markets Institute has appointed ICE Benchmark Administration Limited as the calculation agent for EFTERM®. For the calculation of EFTERM®, it applies a waterfall methodology, which currently uses dealer-to-client bid and offer prices and volumes obtained from Tradeweb’s global institutional trading platform or end-of-day settlement prices for ICE® 1 month €STR futures contracts. Tradeable bid and offer prices and volumes from regulated, electronic trading venues will also be used in the waterfall when available. The European Money Markets Institute publishes sample calculations (Beta EFTERM® Rates) on its website for an initial testing period. The sample file will be updated every Monday with the daily calculations from the previous week.
The Beta EFTERM® Rates are for information and illustration purposes only. They should facilitate EURIBOR® users to evaluate the suitability of the Beta EFTERM® Rates as a fallback in their own use cases. The European Money Markets Institute will launch a public consultation in due course to collect such feedback.
Under no circumstances should the Beta EFTERM® Rates be used as a reference in a financial instrument or financial contract. It should not determine the amount payable under a financial instrument or financial contract and it should not measure the performance of an investment fund.
The Beta EFTERM® Rates are available here.
You can download the full press release here.