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Rules for fixing the Tomorrow/Next interest rate in DKK

Calculating the T/N interest rate is based on daily reporting from a number of financial institutions.

Each financial institution reports the extent of unsecured T/N interbank deposit lending denominated in Danish krone and the weighted average interest rate for this lending.

Reporting takes place on all Danish banking days. Turnover that does not follow Danish banking days is not reported on.

Money market deposit lending is estimated as transactions traded with Danish and foreign financial institutions. Money market transactions that are reported are exclusive intercompany transactions and exclusive trade with the Central Bank of Denmark.

Reporting occurs with a delay of one banking day. For example, Monday’s deposits are reported on Tuesday at the latest. Data is reported to Nasdaq by 10AM CET at the latest with information about deposit transactions from the previous banking day. The daily information covers deposits, which are traded in the time period from 9AM till 5PM CET. The sum of individual deposits is estimated in DKK million and the interest is calculated by using a weighted average with four decimals.

The T/N rate is calculated in accordance with the day-count convention on the Danish money market, which is ACT/360.

Nasdaq calculates an average rate of interest on the basis of reports, where each financial institution’s interest rate is entered with a weight that corresponds to the institution’s share of the overall deposit that is reported.

Calculating the T/N interest rate in cases of low turnover

T/N interest rate calculations must be supplemented with quoted rates if the overall reported turnover is less than DKK 3,000 million.

The T/N committee appoints a panel of financial institutions that participate in T/N reporting and that are expected to be able to fix quotas for T/N rates before 11AM.  The quota fixing must be based on the interest rates that the bank would have set for the other T/N reporters on the T/N market the day before, taking into account the additional relevant market prices. T/N rates must be quoted with four decimals. The procedure for this is set out in separate guidelines drafted by T/N reporters.

All financial institutions that participate in the T/N reporting are entitled to enrollment in the panel that fixes quotas for a T/N rate. All members of the panel are obliged to fix quotas when requested. Non-compliance of this obligation results in automatic exclusion from the panel unless it is due to force majeure, which includes official strike.

The starting point for quota fixing is stated in the technical specifications for the T/N interest rate.

When calculating the T/N interest rate the panel banks should report the quoted interest rates to Nasdaq using the following method:

If the overall reported turnover is under DKK 3,000 million, subtract the actual turnover from DKK 3,000 million. The remaining amount is divided equally by the number of panel banks that quote T/N interest rates. This amount must be rounded up to the nearest DKK million.

If the panel bank has had a turnover, this is added to the amount mentioned above and a weighted interest rate of the overall amount is calculated before a new one is reported.

If a reporter that is not a panel bank has had a turnover, this turnover and the weighted interest rate should be reported to Nasdaq as new.

The T/N interest rate is published with four decimals at 12PM on the day of reporting on Nasdaq’s homepage. A T/N fixing that is published and which contains quoted rates will be marked with a comment of whether the interest rate is fully or partially quoted. Quoted rates by individual financial institutions are also shown on Finance Denmark’s website.

The rules for participation and calculating the T/N interest rate are also shown on Finance Denmark’s website. An up-to-date overview of the banks that participate in quota fixing is also available on the Finance Denmark’s website.

If Nasdaq detects errors in the T/N fixing after publication, these will be rectified and the corrected news will be published as soon as possible. Correcting errors can take place at the latest one hour after publication.

The T/N Committee

Finance Denmark carries out the administration of T/N, but Nasdaq interprets the daily T/N calculation.

In connection with the T/N interest rate, a committee has been established within the framework of Finance Denmark in order to deal with questions concerning the T/N interest rate, including fixing the circle of reporters. The committee consists of all T/N reporters. Nasdaq participates with observer status.

The main objective of Finance Denmark’s money market committee is to ensure the quality of the Finance Denmark’s money market interest rates. As a starting point the committee deals with cases in relation to Finance Denmark’s quoted reference rates. The committee also deals with questions in relation to quoted T/N rates in its capacity as a self-monitoring body.

1) Unsecured deposit in accordance with the definition of the Tomorrow/Next interest rate.

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