ZARONIA observation period ends

As market participants are aware, ZARONIA is SARB’s preferred JIBAR successor rate and is published on the SARB’s website every South African business day at 10:00am. The 1 year ZARONIA observation period commenced on 2 November 2022, although market participants were discouraged from using the rate in contracts. During this time, market participants were encouraged to observe ZARONIA’s performance and consider the implications of adopting it as a replacement to JIBAR. The formal announcement of the end of the observation period means that ZARONIA is now available for use in new contracts and positions.

This is an important milestone for the South African market ahead of JIBAR’s ultimate cessation, which SARB has referred to as a “multi-year initiative”. To further support market participants in adopting ZARONIA, SARB has recommended market conventions for ZARONIA-linked derivatives and cash market products. These materials will assist market participants in adopting a backward-looking overnight, transaction-based rate, ZARONIA, as opposed to the forward-looking term rate, JIBAR. Given the fundamental structural difference in the rates, the SARB has deemed it prudent to recommend conventions for use to support the market in building liquidity in ZARONIA.

Standard Bank is working closely with the SARB Market Practitioners Group and is committed to supporting the South African market, and our clients, in the transition away from JIBAR. Please do not hesitate to reach out to your Client Coordinator should you wish to discuss the impact of the transition in general, or Standard Bank’s ZARONIA product offering. In line with the general transition approach, Standard Bank is focused on developing and expanding our ZARONIA derivative product offering as a first critical transition milestone.

If you have not already done so, we would encourage all clients to analyse the various publications related to ZARONIA on the SARB website.