UK benchmark rewrite threatens access to Asian NDF fixings

Key facts

• UK regulators are proposing a new benchmark regime.
• The proposed regime is called the Special Authorised Benchmark Regime (SABR).
• SABR could restrict access to Asian currency non-deliverable forward (NDF) fixings.
• The proposed regime may not align with international standards.
• This could potentially exclude UK-based traders from NDF fixings.
• NDFs are used to hedge against currency risk in countries with restricted currency conversion.

UK regulators are considering a significant overhaul of the benchmark regime that could impact access to Asian currency non-deliverable forward (NDF) fixings. The proposed Special Authorised Benchmark Regime (SABR) is intended to update the UK's framework for financial benchmarks. However, concerns have been raised that the SABR may not align with international standards. This potential misalignment could lead to UK-based traders being excluded from popular Asian NDF fixings. NDFs are financial derivatives used to hedge against currency risk in countries where direct currency conversion is restricted. The proposed changes could create barriers for market participants who rely on these fixings for trading and risk management. The implications of the SABR are still being assessed, but it represents a notable shift in how financial benchmarks will be regulated in the UK.