About Swiss Reference Rates (SARON)
Overnight interest rates play a significant role in determining the yield curve. Going forward, the point of departure for Switzerland’s yield curve is SARON, an overnight reference rate based on data from the Swiss franc repo market. Repo transactions represent an important instrument for banks in their daily liquidity management activities. Repo transactions have become a key pillar of the money markets – and the Swiss National Bank (SNB) uses repo transactions as a means of implementing its monetary policy.
The reference rate SARON, which stands for Swiss Average Rate Overnight, represents the overnight interest rate of the secured money market for Swiss francs (CHF). It is based on transactions and quotes posted in the Swiss repo market, a pivotal part of the Swiss Value Chain. SIX is the Benchmark Administrator of SARON and is responsible for its calculation and publication. Further information on licensing, data access and usage can be found on the licensing page.
Internationally, there is a consensus that financial benchmarks need to be resilient and reliable. Repo markets, in their role as the backbone of the financial industry and central bank activity, are the obvious choice. They are liquid, highly regulated and of high integrity. The National Working Group on Swiss franc reference rate, which leads efforts to reform benchmark interest rates, has recommended SARON as the alternative for CHF LIBOR.
|SARON||Swiss Average Rate Overnight|
|Definition||Volume-weighted average interest rate|
|Calendar||CHF Currency Holiday Calendar|
|Fixing-Time||12 pm 4 pm 6 pm|
|Fixings||SRFXON1 SRFXON2 SRFXON3|
|Futures||EUREX: FSO3 / ICE: SA3|
|Clearing||CME, EUREX, LCH|
|Historical data since||30.06.1999|
|Publication start||Daily at 8:30 a.m.|
|Publication interval||Every 10 minutes|
Why Choose Swiss Reference Rates?
SARON is an overnight rate reflecting both actual transactions and binding quotes of the underlying Swiss repo market while its methodology ensures robustness and reliability. The market is under the surveillance of SIX Exchange Regulation and is regulated under the Swiss Financial Market Infrastructure Act (FMIA) as a multilateral trading facility. Between 2017 and 2019 the average daily trade volume was around CHF 3.3 billion.
Based on data from the secured money market, SARON can be used for different financial market instruments but it is particularly suitable for secured loans due to the negligible counterparty and liquidity risks. As a risk neutral benchmark, SARON shows considerably lower volatility to changes in bank confidence levels and during turbulent phases compared to a reference rate based on the unsecured money market. For the use of interest rate swaps, this is of course an essential advantage. Major clearing houses offer to clear swaps based on SARON. Exchanges are now offering the ability to trade futures on SARON as well.
SARON is based on concluded transactions and trade quotes posted on the SIX Repo trading platform, provided they lie within the parameters of the quote filter. The quote filter is parameterized in a way that limits the possibilities for manipulation. SARON is continually calculated in real time and published every ten minutes. In addition, a fixing is conducted three times a day at 12 pm, 4 pm and 6 pm. The 6 pm fixing serves as a reference reading for derivative financial products and the valuation of financial assets.
In 2017, SIX established an Index Commission for Swiss Reference Rates that advises in all matters related to them. SIX is committed to the IOSCO Principles for Financial Benchmarks and SARON is approved under EU Benchmark Regulation. The administration of the Swiss Reference Rates is in compliance with the recommendations and requirements set forth in these regulations. This also ensures the international use of the SIX benchmarks for customers and financial service providers.
Five Key Differences Between SARON and LIBOR
Reference interest rates are important. And not just as far as monetary policy is concerned. Financial contracts for loans, savings deposits and mortgages all refer to these rates, which also provide an essential baseline on the derivatives market or for structured products. In less than two years, support for LIBOR will be removed and banks will have to switch contracts, products, systems and processes based on the rate to new, alternative reference rates (ARR). For the Swiss market, SIX provides a robust alternative to the CHF LIBOR with SARON that offers five key advantages:
|Money Market||SIX operates the fully automated trading platform (SIX Repo) for the secured money market (short-term credit funding) in Switzerland. The SARON reference rate reflects this repo market. “Funding against collateral” is the rule here.||The LIBOR reference rate reflects the unsecured money market (short-term credit funding). “Funding against creditworthiness” is the rule here (no collateral required).|
|Participants||Some 160 banks and insurance companies take part in the Swiss repo market, including the Swiss National Bank (SNB), which uses it to supply Switzerland’s economy with liquidity.||A group of 11 to 16 panel banks is involved in setting LIBOR.|
|Basis||Banks lend money to each other, with securities being deposited as collateral (secured interbank market). The borrower undertakes to repurchase these securities at a later date and pays interest.||The panel banks answer the question of what interest rate they could borrow funds at if they ask for an interbank offer in a reasonable market size. Illicit collusion between some of those panel banks caused the LIBOR scandal in 2011.|
|Values & Calculation||Actual concluded transactions and quotes flow into the calculation of SARON. That’s approximately 110 interest rates per day on an annual average.||The estimates submitted by the panel banks flow into the calculation of LIBOR. Between 5 and 8 interest rates are used, depending on the number of banks involved. The 3 to 4 highest and lowest interest rates are discarded.|
– Calculated/published every ten minutes|
– Fixing conducted three times a day (closing rate: 6:00 pm)
– Available in one currency (CHF)
– Calculated once a day|
– Published once a day
– Available in five currencies (CHF, EUR, GBP, JPY, USD)
Key Product Information
See all available Documents including Historical Data
For the latest values of the overnight term (ON) and the snapshot 6pm, visit our closed user group site.