(Withaya Prasongsingh/Getty Images)
South Africa's derivatives market will begin using the central bank's new rand money market benchmark to price short-term loans this year.
The South African Rand Overnight Index Average (Zalonia), which replaces the Johannesburg Interbank Average Interest Rate, will be used in the new contract derivatives market from the second half of this year, the central bank said.
The central bank said its decision to focus on derivatives markets was based on the Financial Stability Board's recommendation that its securities tend to be better suited to reference rates with no or nearly no credit risk.
“The relative ease of transition in this market may support transition in other markets,” the bank said in a paper on its website.
Zaronia will then be rolled out to the spot market next year, and Jibar will disappear in 2026.
Zalonia is based on real transactions and can be compared to other interest rates such as the Euro Short Term Rate and the Sterling Overnight Index Average.
The introduction strengthens global reform efforts and follows scandals surrounding the manipulation of the London Interbank Offered Rate (previously the most commonly used reference rate in financial markets). The transition is underway.
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