A lack of volume in the EONIA-linked cleared swaps market could hamper the transition to RFRs based on actual transactions, as required by regulators, according to Chris Barnes at Clarus Financial Technology. A quote-based system is the most likely solution, Barnes said, but added this could replicate existing problems with EURIBOR. The European Commission has said it will examine whether clearing houses should be allowed to trade directly between member states and non-EU countries if they are not regulated under a single set of rules. It proposes three methodologies based on OTC derivatives and another that uses futures data.
A lack of volume in the EONIA-linked cleared swaps market could hamper the transition to RFRs based on actual transactions, as required by regulators, according to Chris Barnes at Clarus Financial Technology. A quote-based system is the most likely solution, Barnes said, but added this could replicate existing problems with EURIBOR. Last month, the ECB working group on euro-RFRs launched a consultation on the transition from EONIA to ESTER, which ends on 1 February. It proposes three methodologies based on OTC derivatives and another that uses futures data.