The Bank of England and His Majesty’s Treasury are undertaking a review of the statutory powers used to collect sterling money market information. This initiative aims to ensure the Bank's data collection capabilities remain sufficient to maintain strong coverage and visibility of Sterling Money Market activity, particularly as markets evolve due to changes in structure, regulation, infrastructure, or booking locations. The Bank may consider collecting data on material Sterling Money Market activity within group entities to preserve adequate coverage for SONIA if required in the future.
Discussions also focused on the potential implications for SONIA of extending RTGS and CHAPS settlement hours. The Bank of England consulted on moving towards a near 24-hour, seven-day settlement mode over the summer. Feedback is currently being reviewed, with intentions to share emerging themes and next steps in the first quarter of 2027. The Group considered how longer settlement hours might affect SONIA’s definition, publication time, reporting, and operational processes. One scenario discussed involves CHAPS settlement closing at 18:00 and reopening at 20:00, creating a discrepancy between the CHAPS value date and the calendar date. Market participants might adapt by delaying or accelerating booking decisions to manage interest calculations.
Further considerations included the impact of scenarios where CHAPS settlement closes later in the evening, given that SMMD reporting is required by 07:00 for the Bank to publish SONIA by 09:00. While many reports are automated, the ability to resubmit or regenerate prior-day data was highlighted as crucial. The Group expressed a strong preference for maintaining the current SONIA publication time of 09:00, as a later release could impact the processing and fulfilment of products referencing SONIA. The potential for Sunday and future full-weekend CHAPS opening also raised questions about whether weekend activity would differ structurally from weekdays and how SONIA should be published or incorporate weekend data.
The group also discussed the Office for National Statistics consultation on release times for market-sensitive economic statistics. Release times were moved to 07:00 during the Covid period, but subsequent extensions of trading hours for certain futures and gilt futures have altered the market context. Participants noted that while ICE extended trading hours for SONIA futures and gilt futures to 01:00 in July, data release times after 08:00 are generally preferred due to deeper market liquidity once cash gilt and swap markets are open. However, a 09:30 release was considered relatively late for pricing and trading decisions. Firms were encouraged to respond directly to the ONS consultation.
Looking ahead, participants anticipate a broadly stable year-end sterling cash market, influenced by repo market stability, which is expected to be more stable than the previous year. Cross-currency basis dynamics are also expected to remain stable. The possibility of reserve drainage increasing reliance on Bank of England facilities and impacting SONIA volumes, spread, and commercial-paper pricing was discussed. The aggregate quantity of reserves and their distribution within the market will be key factors.
Developments in listed and over-the-counter SONIA markets were presented, showing exceptionally high volumes in SONIA futures and options in March following increased geopolitical volatility, with robust open interest despite political uncertainty. More recent volatility has again increased volumes, though not to March's record levels. The extension of trading hours for SONIA futures and gilt futures by ICE on 6 July has facilitated greater involvement from Asian, Middle Eastern, and United States-based clients. In SONIA swaps, turnover increased sharply during March and April volatility before returning to usual levels. Amounts outstanding have declined slightly, possibly reflecting the unwinding of positions anticipating lower rates, changes in hedge-fund positioning, and the repricing of rate-cut expectations.
Members noted future discussion topics, including a review of progress in the DMO T-bills market. Attendees included representatives from HSBC, ICE Futures, Insight Investments, LCH, LGIM, Mizuho, NatWest, Rabobank, RBC, Société Générale, TC ICAP, and the Bank of England. Apologies were received from Blackrock and ISDA.
