HSBC TRY Fixings - Consultation Paper
Markit Consultation on HSBC TRY
Fixings and FX data substitution
09 September 2016
Copyright © 2016 Markit Group Limited
HSBC TRY Fixings - Consultation Paper
1. Markit’s Administration
Markit is the Administrator of a number of HBSC indices and is the process of transferring administration of a
number of additional HSBC indices to Markit. The list of HSBC indices currently administered by Markit can
be found here.
All capitalised terms used in this document shall have the meaning ascribed to them in the International
Organisation of Securities Commissions Principles for Financial Benchmarks (the “IOSCO Principles”)
unless stated otherwise.
2. Proposal for data substitution from FX Broker quotes to WM rates
Previously Markit has undertaken a consultation with regards to substitution of broker quotes for HSBC’s
Foreign Exchange indices. Please see the consultation here. For the reasons outlined in that consultation
Markit is also suggesting the substitution of the five broker FX quotes (the “FX Broker Data”) used in the
HSBC TRY Fixings (the “TRY Fixings”) with the equivalent WM/Reuters rates (the “WM Rates”).
The TRY Fixings (see Appendices A for detailed information on the TRY Fixings) rely on broker quotes (the
“FX Broker Data”) use FX Broker Data in the calculation of the level. Markit has not yet formally assumed the
role of administrator for the TRY Fixings but Markit is of the opinion that substitution of the FX Broker Data
with benchmark data from WM/Reuters (“WM Rates”) would enhance the reliability, transparency and
representativeness of the TRY Fixings and mitigate many of the risks which may arise when using FX
Broker Data. The timetable Markit is suggesting is as follows –
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09 September – Consultation opens
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26 September – Consultation closes
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30 September – Markit becomes the administrator of the TRY Fixings
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30 September – All FX Broker Data substituted with WM Rates
3. Analysis and conclusion
The proposed data substitution is driven by the principle that the WM Rates have a three tiered sourcing
model that provides greater data sufficiency than the FX Broker Data.
Markit’s proposal is further supported by the results of analysis which has compared the TRY Fixings over a
period of over two years (January 14 to August 16). The detail of this analysis is contained in Appendix A.
Markit’s conclusion is that the overall differences on the index levels during that period would not have been
materially different if WM Rates had been used instead of FX Broker Data.
4. Consultation process
The participation of Stakeholders in this consultation is important as Markit seeks to gather views on the
proposals herein and the suggested timetable for implementation of those proposals. Markit may publish
summaries of Stakeholders’ comments along with Markit’s responses to those comments unless the
Stakeholder in question requests confidentiality.
To participate in this consultation please respond to Markit Index Administration Services at [email protected].
Please be advised that all comments will be reviewed and considered before a final decision is made;
however, Markit makes no guarantee and is under no obligation to comply with any of the responses. The
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HSBC TRY Fixings - Consultation Paper
consultation may result in no changes or outcome of any kind. If Markit decides to change the index
methodology, an announcement will be posted on our website. Markit reserves the right to make a final
decision on the proposal, and this will be ratified by the Index Administrator Committee and, if appropriate,
Markit’s Benchmark Oversight Committee.
5. Key Questions
1.
Do you agree with the proposal to substitute FX Broker Data with WM Rates?
2.
Do you object to the proposed timetable for the substitution to be implemented?
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Appendix A – Data substitution for the FX Indices
Scope
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On the 30 September Markit intends to take over administration of the following HSBC Indices:
Family
Asset Class
Index Name
RIC
Data point
TRY Fixing
Rates
TRY Fixing 1 Month Index
.HSIRTR1M
1M Fwd
TRY Fixing
Rates
TRY Fixing 2 Month Index
.HSIRTR2M
2M Fwd
TRY Fixing
Rates
TRY Fixing 3 Month Index
.HSIRTR3M
3M Fwd
TRY Fixing
Rates
TRY Fixing 1 Month Index
.HSIRTR6M
6M Fwd
TRY Fixing
Rates
TRY Fixing 1 Week Index
.HSIRTR1W
1W Fwd
TRY Fixing
Rates
TRY Fixing Overnight Index .HSIRTRON
Overnight
Analysis
The TRY Fixings (Forward 1M, 2M, 3M, 6M, SW) where backtested for period January 2014-August 2016;
results are shown as follows:
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.HSIRTR1M – Differences within 2% tolerance level with 1 exception (2.7%)
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.HSIRTR2M – Differences within 2% tolerance level
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.HSIRTR3M – Differences within 2% tolerance level
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.HSIRTR6M – Differences within 2% tolerance level
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.HSIRTR1W – Differences within 2% tolerance level with 8 exceptions (largest 6.8%)
The TRY Fixing Overnight Index (.HSIRTRON) was not backtested due to lack of historical data; Index will
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be directly run from 19 September to 29 September during the parallel phase; Markit expects results to be
in line with all the other TRY Fixings.
Notes
The 5 Broker FX Forward rates used in the calculation are currently snapped at 11:45am; during backtesting
Markit used WM 12pm rate, which was the closest snap available (WM only provides snaps on the half
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hour). When the administration of the indices is transferred on the 30 September, Markit will continue to use
the WM 12pm rate in the calculation.
More detailed information about the analysis can be provided to Stakeholders upon request.
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HSBC TRY Fixings - Consultation Paper
Graphs
.HSIRTR1M
.HSIRTR2M
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HSBC TRY Fixings - Consultation Paper
.HSIRTR3M
.HSIRTR6M
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HSBC TRY Fixings - Consultation Paper
.HSIRTR1W
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