The visible hand: Benchmarks, regulation and liquidity

Matteo Aquilina, Gbenga Ibikunle*, Vito Mollica, Tom Steffen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

According to recent theoretical work, a more transparent and precise benchmark assessment should positively impact liquidity in the underlying market. We exploit a benchmark regime change in the $289 trillion interest rate swaps market to test this prediction. Utilizing proprietary electronic order book data, we find improved liquidity effects in the USD swaps market following the transition to the regulated ICE Swap Rate. Regulations that improve the methodology and oversight of benchmarks can, therefore, impact markets positively. Conservative estimates of direct savings in a single swap tenor on one trading platform are in the region of $4 million - $7 million.
Original languageEnglish
Article number100734
Number of pages32
JournalJournal of Financial Markets
Early online date20 Apr 2022
Publication statusPublished - Nov 2022

Keywords / Materials (for Non-textual outputs)

  • benchmarks
  • regulation
  • interest rates
  • ICE swap rate
  • liquidity


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