FAIRFix will promote transition
Everyone can use it
Because of the contractual constraints on market makers of FAIRFix, and on derivatives that reference FAIRFix, everyone can use FAIRFix term fixings.
Fully thought through plan for the future
FAIRFix has a fully thought through plan for the future unlike other term fixing methodologies. Current plans envisage restricting the use of fixing rates to select sectors of financial markets without any indication on how this would be done nor how this would be decided. In addition it is unclear what impact this would have on the functioning of financial markets.
No IT & systems upgrades
Term fixings vastly simplify transition efforts allowing all parties to transition without amending IT and risk management systems.
No basis between term fixings and regular OIS
FairFix fixings are economically equivalent to the realised rate and so there will be no basis between FairFix SONIA and SONIA OIS. This is in marked contrast to all other fixing methodologies where a basis will likely develop (cf. LCH/JSCC basis which exist for swaps that reference the exact same JPY LIBOR benchmark).
Uniform rate methodology possible
No convoluted, divergent and complex overnight accruals needed as FAIRFix is suitable for use in all products (e.g. FRNs, Loans, Trade Finance, XCCY basis swaps) and even for interbank transactions (e.g. XCCY basis swaps).
Promoting Liquidity
The FAIRFix derivative submission obligation translates end users’ non-price sensitive demand into STIRT OIS markets for the first time ever, ensuring liquidity increases, particularly in the nascent ARR benchmarks such as SOFR and SARON.
Suitable for a Tough Legacy ‘Synthetic’ LIBOR
FAIRFix is suitable for use in a temporary Tough Legacy LIBOR fixing rate that was equal to the FairFix Fixing plus the ISDA fallback spread for that fixing tenor. This would encourage adherence to the ISDA fallback protocol as bilateral swaps would remain correlated with Tough Legacy contracts.
Sufficient notice to make payments
Term fixings provide sufficient notice to all parties to make payments.