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Rules for fixing the CITA interest rate swap

The CITA interest rate swap reference rate was established at the turn of the year 2012/2013.

In a CITA interest rate swap (Copenhagen Interbank Tomorrow/Next Average) the day-to-day rate (T/N rate) is exchanged against a fixed DKK rate for an agreed fixed period, which is agreed upon entering the swap. An exchange of principal does not occur in a CITA interest rate swap and a payment of difference only takes place upon the expiry of the interest rate contract.

Please refer to Finance Denmark’s market maker agreement for CITA (T/N IRS) for further technical specifications.

Definition of the CITA interest rate swap fixing
The CITA interest rate swap fixing is a quoted rate of interest that states the average asking price at 10AM, calculated on the basis of received quotas.

The quoted rates are reported as an asking price with 3 decimals.

The fixing of quotas occurs on a basis of Actual/360 days.

Obligations
On Danish banking days, all CITA interest rate swap supporters are obliged to quote an asking price at 10.30AM for CITA interest rate swaps with 3 decimals for the following maturities: 1, 2, 3, 6, 9 and 12 months.

The fixing of quotas occurs on a basis of Actual/360 days.

Supporters who live outside of Denmark are not obliged to quote and report on national public holidays.

The fixings are published at 11AM with 4 decimals.

Supporters must allocate the necessary resources and have the necessary technical systems to ensure that the daily reporting occurs in a satisfactory manner.

Supporters must comply with recommendations and answer enquiries from the Money Market Committee or from the appointed service provider without undue delay.

Calculating ixings
Supporters must comply with recommendations and answer enquiries from the Money Market Committee or from the appointed service provider without undue delay.

Fixings are calculated for each individual period. Each CITA interest rate swap supporter’s rates enter fixing calculations equally weighted on the basis of current reports, as the starting point is taken from the number of supports in accordance with the following model:

With twelve or more supporters, the three highest and three lowest rates are left out and a simple average of the remaining rates is calculated.
With eight to eleven supporters, the two highest and two lowest rates are left out and a simple average of the remaining rates is calculated.
With seven to four supporters the highest and lowest rates are left out and a simple average of the remaining rates is calculated.
If there are fewer than four supporters, a simple average of the rates is calculated.
Only rates that are reported on time enter the fixing.

If inadequate reporting is due to errors such as system errors, these can be counted in given circumstances, if the individual supporter contacts the estimator before rates are calculated.

Reporting that deviates markedly from the median will be sorted out before the fixing is calculated. The Money Market Committee lays down the framework for what is understood as a marked deviation.

Circle of CITA interest rate swap supporters
Finance Denmark’s Money Market Committee compiles the circle of CITA interest rate swap supporters.

Every bank that is an active market maker in CITA interest rate swaps can request to become a CITA interest rate swap supporter. The request should be addressed to Finance Denmark’s Money Market Committee.

Market makers in CITA interest rate swaps can recommend to the Money Market Committee that other banks are enrolled as supporters, as long as they are active in DKK on the money market.

In its assessment of a specific application, the Money Market Committee will emphasis whether the bank in question has thorough knowledge of the CITA interest rate swap market and whether the bank is active on the market for CITA interest rate swaps.

The Money Market Committee has to take into consideration that it must be possible to calculate a fixing on all Danish banking days.

Enrollment procedure

If the Money Market Committee approves a request to participate in the CITA interest rate swap fixing, a trial period will commence. The Money Market Committee also decides on the length of the trial period. If a former supporter wants to re-enter the fixings, the Money Market Committee can waive the trial period.

If the trial period proceeds satisfactorily, the Money Market Committee will finally approve the bank in question’s enrollment as a CITA interest rate swap supporter.

The reported interest rates, as well as an overview of how the CITA interest rate swap fixing would have looked if the applicant’s quotas were included, are presented at the next committee meeting after the trial period expires.

In the overall assessment of an applicant and the course of the trial period, importance is attached to whether the fictive CITA interest rate swap fixing statement, where the bank in question’s quoted rates are entered, is recognizable (in other words, reflects the market prices) to committee members. 

The Money Market Committee decides the date for when continual reporting commences.

Resignation and exclusion
A financial institution can resign from the scheme at its own request. Resignation must take place with one month’s written notice to the Money Market Committee before the end of the month (running month) with effect from the end of the following month.

If a supporter does not live up to their obligations in relation to the current rules or is no longer an active participant on the DKK money market or the market for CITA interest rate swaps, the committee can decide that the supporter in question is to be excluded from the circle of supporters (and if applicable also from the committee). This also applies if a supporter does not quote true and fair rates. The same elements as with enrolment in the scheme are used in the decision of whether a CITA interest rate swap supporter is no longer active.

The exclusion of a supporter takes effect from the moment that the committee makes a decision on the matter.

If the supporter is represented in the committee, the member in question does not have voting rights but has the right to speak when the committee handles a case on the supporter’s circumstances, including possible exclusion.

Any decision on excluding a supporter must be subsequently approved by Finance Denmark’s board of directors. The subsequent approval procedure does not have a delaying effect. If the exclusion is overruled by Finance Denmark’s board of directors the financial institute in question will re-enter the scheme as soon as possible.

Monitoring
Finance Denmark’s Money Market Committee leads the overall monitoring of CITA interest rate swap fixings. The committee can delegate continual supervision to an appropriate service provider. 

Logbook
Supporters must keep a log book of their daily reporting.

Technical requirements
Finance Denmark’s Money Market Committee decides how and where the daily rates will be reported.

The Money Market Committee
The main aim of Finance Denmark’s Money Market Committee is to ensure the quality of Finance Denmark’s money market fixings.

Members of the committee are appointed by Finance Denmark’s board of directors. Eligibility requires an employment relationship with a CIBOR, SWAP reference interest rate or CITA interest rate swap supporter. If the employment relationship is terminated, membership of the committee will automatically be terminated. The supporter can subsequently choose to nominate a new person as a member of the committee. Eligibility for the committee requires thorough knowledge of the Danish financial market and that the person in question does not fix interest rates on a daily basis Finance Denmark is the secretariat for the committee and participates in its meetings without voting rights.

The committee handles all questions concerning fixing quotas of CITA interest rate swap fixings, including appointing the circle of supporters.

The committee makes decisions with 2/3 majority unless special rules apply. When adding up votes in connection with committee decisions, only members in attendance or any proxies will be counted. Attendance is also understood as members who participate via telephone or by similar means.

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Finance Denmark is an interest organisation for banks and mortgage institutions in Denmark. Our members are mortgage institutions, banks, savings banks, cooperative savings banks and Danish branches of foreign banks.

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