FCA: Sonia derivatives liquid enough to create term rates

Andrew Bailey says a forward-looking rate can work, but its use should be limited

The UK Financial Conduct Authority has said there is enough liquidity in Sonia-linked instruments to construct a forward-looking term rate, but reiterated that it should only be used by a subset of the market.

“We’ve got to the point where it’s not only realistic but practical that we can actually make the next steps towards creating a term rate as we’ve got the foundation on which to build,” said FCA chief executive Andrew Bailey, speaking at a panel session held at the Bank of England (BoE)