ICE Benchmark Administration launches two new ICE Swap Rate Inflation Swap benchmarks

§ 01 Executive Snapshot

• What: ICE Benchmark Administration has launched two new ICE Swap Rate Inflation Swap benchmarks.
• Who: Intercontinental Exchange, Inc. (NYSE:ICE) and ICE Benchmark Administration Limited (IBA).
• Why it matters: The introduction of these benchmarks provides regulated, transparent reference rates for inflation swaps, addressing the growing demand for inflation risk management tools in the U.K. and Eurozone.

§ 02 Key Developments

• The new benchmarks reference the U.K. Retail Prices Index (RPI) for GBP and the Eurozone Harmonised Index of Consumer Prices excluding tobacco (HICP ex-tobacco) for EUR.
• The benchmarks are based on zero-coupon inflation index swaps and aim to provide robust reference rates for transactions and valuations.
• The GBP and EUR reference rates are calculated daily using the ICE Swap Rate® Waterfall Methodology based on dealer-to-client data from Tradeweb.
• Benchmarks are published in tenors ranging from 1 to 30 years.
• Clive de Ruig, President of IBA, highlighted the importance of these benchmarks amid evolving inflationary pressures and shifting central bank policies.

§ 03 Strategic Context

• The benchmarks aim to fill a gap in the market for inflation risk management tools, responding to increased demand due to changing economic conditions in the U.K. and Eurozone.
• ICE Swap Rate® benchmarks are already recognized as critical and significant benchmarks under the U.K. and EU regulations, respectively, indicating their importance in financial markets.

§ 04 Strategic Implications

• Immediate implications include providing market participants with transparent and regulated reference rates, enhancing certainty and predictability in inflation swap settlements.
• Long-term, these benchmarks may solidify IBA's position in the financial markets as a leading administrator of regulated benchmarks, particularly in the inflation swap market.

§ 05 Risks & Constraints

• Potential regulatory risks include changes in benchmark regulations that could affect the administration of these new benchmarks.
• Competition from other benchmark providers may pose a challenge in gaining widespread adoption of the new ICE Swap Rate Inflation Swap benchmarks.

§ 06 Watchlist / Forward Signals

• Key upcoming milestones include the market's response to the new benchmarks and their adoption in transactions and financial products.
• Future developments in inflationary pressures and central bank policies will signal the ongoing relevance and utility of these benchmarks in the inflation swap market.