Occasional Paper No. 27: Benchmark regulation and market quality

In this paper, we examine the implications of the benchmark regime change in the interest rate swap market on underlying market conditions.

Occasional Paper No. 27 (PDF)

We have published this Occasional Paper alongside an Insight article - The power of benchmarks: an analysis of the ice swap rate.

Find out more about Occasional Papers and read our disclaimer.


Benchmarks are fundamental elements of financial markets’ infrastructure. In this paper, we analyse the effects of the change from the panel-based benchmark assessment under the ISDAFIX regime to the market-based assessment under the ICE Swap Rate regime and the simultaneous start of regulatory supervision by us.

We find that the transition in March 2015 has a neutral to positive effect on the representativeness of the benchmark. Studying proprietary order book data of electronically-traded USD interest rate swaps, we also find that liquidity in the underlying market improves following the benchmark regime change.

Our results are robust to a multitude of controls and show that the enhancement in liquidity for swaps with a regulated benchmark assessment is over and above the improvement in those swaps without assessment. As such, the effects of the regulation, as measured in this study, are positive. Overall direct savings measured in this study are in the region of $4m–$7m, but they only account for one tenor and a single trading platform. The overall benefits are likely to be substantially larger.


Matteo Aquilina, Gbenga Ibikunle, Vito Mollica, and Tom Steffen.

Matteo Aquilina and Tom Steffen work in the economics department of the FCA. Gbenga Ibikunle is an Associate Professor at the University of Edinburgh and Vito Mollica is an Assistant Professor at Macquarie University.


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