Sat. Nov 28th, 2020

Regulation HK

Financial Regulator

TMA Publishes Consultation Conclusions on HONIA Enhancements

2 min read

HONIA will continue to be calculated based on data from the existing five contributing money brokers while TMA conducts further study of the interbank funding market. The reporting window will change to 8:00-16:00.

Hong Kong’s TMA (Treasury Markets Association) has concluded its consultation on technical refinements to HONIA (HKD Overnight Index Average).

The consultation, launched in April, sought feedback to enhance the robustness and representativeness of HONIA – a near risk-free overnight interbank funding rate based solely on transaction data – after it was selected as the alternative reference rate for HIBOR (Hong Kong Interbank Offered Rate).

TMA had proposed technical refinements to HONIA in three areas.

Data source: Rather than capture overnight interbank funding transactions through money brokers to compile HONIA, TMA proposed to collect transaction data directly from banks, the primary source of the data.

A majority of the respondents supported the proposal, with some suggesting that a reasonable number and mix of banks should be maintained to strike a balance between market coverage, diversity and administrative effectiveness. Other suggestions included the exclusion of intra-group and intra-bank transactions from the data submissions, and the collection of the required data from post-trade facilities to enhance data integrity.

TMA says it will conduct further study of the interbank funding market to examine whether there is room for enhancing the representativeness of HONIA, focusing on two key issues, data source and sample size. In the meantime, HONIA will continue to be calculated based on the five contributing money brokers’ data.

Reporting window: TMA proposed to extend the reporting window to capture all eligible transactions between 08:00 and 17:00 daily, rather than 09:00 to 16:00 under the current methodology for HONIA.

Based on higher levels of transactions in the early morning, and “relatively rare” transactions after 16:00, TMA has decided to change the reporting window to 8:00-16:00.

Publication time: TMA proposed to move the publishing of  HONIA from same-day basis to publishing on the following business day to allow more time for compilation.

Given the closing time of the reporting window will remain at 16:00, TMA has decided there is “no strong need” to publish HONIA on a T+1 basis. In addition, to facilitate the use of HONIA for discounting and PAI (Price Alignment Interest) calculation by CCPs and market participants, TMA will continue to publish HONIA on a same-day basis.

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