Icap’s global broking and information services (IIS) have joined forces to launch the Icap Euro Interest Rate Swap (IRS) index, a new benchmark tracking the return of a strategy which invests in euro interest rate swaps. The index incorporates proprietary Icap order and trade-driven prices, which are published on the International Securities & Derivatives Association reference pages.
“Icap’s index business is a natural evolution of having an internal data business,” said Jan de Smedt (pictured), global head of indices, IIS. “Because of our market leading position in the interest rate swap market it became obvious that the first index launch should be focused on interest rate swaps.” Although the data to build the index is sourced from the broking desks, Icap’s index business is an independent legal entity in the Icap Group, said de Smedt.
Products tracking the new index could be valuable management tools to hedge against interest rate fluctuations and also be used for duration management and the construction of smart beta and structured product strategies, said de Smedt. “We can leverage our knowledge and data around swaps and currencies, and provide a benchmark that can be used for portfolio duration management, interest rate risk management, the evaluation of fund performance and validation of other proprietary indices, as well as a building block for structured products and smart beta strategies.”
The initial focus is on institutional investors, said de Smedt. “During the pre-marketing of the index there has been much interest from structured products desks within investment banks who are seeking exposure to the interest rate swaps market via a liquid index strategy,” said de Smedt.
The new index is the first in a series. “Where Markit’s iBoxx and iTraxx have become the reference within the credit index space, our ambition is that the Icap Euro Interest Rate Swap index becomes the reference in the interest rate swap index space,” said de Smedt.
Icap has adopted the Iosco (International Organisation of Securities Commissions) Principles for Financial Benchmarks,” said de Smedt. “We follow them strictly and we are in regular contact with the UK Financial Conduct Authority to inform them of our benchmark activities.”
Frits Vogels, chief executive, Europe, Middle East and Africa (Emea) global broking, said, “As the largest interdealer broker in the interest rate market, Icap is well placed to provide meaningful and useful indicative information of the market mid-price at any point in the day. Developing a euro IRS index will help the investment community follow a strategy, assess where the market is going and via the right product, hedge against risk.”
Calculated in real time, the Icap Euro IRS index is available with 1-30 year maturities on Bloomberg.
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