SWE CB proposed in referral to increase predictability of transaction-based reference rate SWESTR so that it becomes more useful as a reference rate in financial contracts.
Intends to implement changes in regulatory framework for SWESTR during Q3 of 2024.
Follows SWE CB Jun. 2023 investigating the year-end effect in SWESTR see #174945.
Overview
Dialogue with market participants and other stakeholders shows that there is a need for greater predictability in SWESTR over changes of year, so that it does not constitute an obstacle to using Swestr as a reference rate in financial contracts.
In the referral, SWE CB proposes that regulatory framework for SWESTR be changed so that the robustness requirement on the transaction volume is lowered.
In addition, intends to introduce new alternative calculation method that applies to all banking days of year instead of 2 alternative calculation methods it currently applies.
Further, it intends to exclude Swestr quotation for last banking day of year in the calculation basis if alternative method used on following day: 1st banking day of year.
Effectiveness
Referral responses must be submitted no later than Apr. 25, 2024.
Jun. 2024 New Rules Issued
On Jun. 7, 2024, SWE CB issued regulatory changes to make Swestr more predictable.
For predictability, less uncertainty in transaction-based reference rate Swestr at turn of year, changes in alternative calculation method, robustness requirements will apply.
By additional measure, Swestr quote for last day of year will never affect Swestr quote for first day of year, changes in regs for reference interest rate will apply from Sep. 23.
In Sweden, transition from Stibor T/N to Swestr has been slow, that is considered to be due to uncertainty about Swestr's listing around the turn of the year.
SWE CB measures try to ensure it can become dominant reference rate in SWE kronor.
Alongside change around turn of year and alternative calculation method for Swestr, robustness requirement for total transaction volume to be lowered from SEK 6 to 2 bn, that reduces the likelihood that alternative calculation method will be used at all.
Measures in line with SWE CB Apr. 8, 2024 proposals later endorsed by referral bodies.
In Sweden, reference rate Swestr exists as complement to Stibor T/N since Sep. 2021.
As in currency areas outside Sweden, initiative with transaction-based reference rate is about strengthening trust and reliability in reference rates.
