What is FAIRFix? 

FAIRFix is a methodology for creating a market place for pricing the fair market rate for all borrowing and lending that wishes to lock in a term rate: End user interests are transmitted into an order book by financial market intermediaries, which are in turn netted off against each other before the net balance is submitted into a Modified Dutch auction of regular overnight index swaps (OIS) to determine the fair market rate for that day’s term fixing rate for the new ARRs.

Which ARRs can use it?

FAIRFix can be used all ARR such as SOFR (Secured Overnight Financing Rate), SONIA (Sterling Overnight Index Average), €STR (Euro Short Term Rate) and SARON (Swiss Average Rate Overnight). Importantly, even where existing term fixing methodologies exist, the FAIRFix methodology could be incorporated into that fixing, transitioning the existing fixing over to a vastly more robust and representative fixing.

How can FAIRFix term fixings help financial market participants?

FAIRFix would greatly increase the robustness and representativeness of term fixings for the new ARR by increasing liquidity in short term OIS markets, removing the possibility of a so-called inverted pyramid (where liquidity in the fixing is dwarfed by the volume of deals that depend upon this fixing) and ensuring that the term fixed deals are fully fungible with the regular compounded in arrears OIS deals.

When are they expected to be available?

There are no current plans to launch FAIRFix though the methodology is free and available to be used by whichever ARR markets choose to base their term fixings on a sound financial basis.