ZAR PAI, PAA and Discounting transition

Dear SwapClear Participant,

With regards to all ZAR-denominated SwapClear Contracts [Note 1] cleared at LCH Limited (LCH), the following approaches apply at present: first, for the purpose of determining the daily net present value of all ZAR-denominated SwapClear Contracts (i.e. for discounting purposes), LCH uses the market prices / rates for interest rate swaps / instruments linked to JIBAR in the construction of its zero coupon curves (among other things); second, for the purpose of determining the Price Alignment Interest (PAI) and Price Alignment Amount (PAA) payable in relation to such ZAR-denominated SwapClear Contracts, LCH uses the daily fixing of the SAFEX Overnight Deposit Rate (“SAFEX”) [Note 2].

Following the announcement by the South African Reserve Bank of the future cessation of the JIBAR benchmark [Note 3], and as part of our ongoing support for the transition from JIBAR to ZARONIA (which is the recommended alternative Risk-Free-Rate in South African markets), LCH intends to adopt ZARONIA for both these purposes.

More specifically, LCH intends to adopt market prices / rates of ZARONIA OIS instruments in the construction of its zero coupon curves for the purpose of determining the daily net present value of all ZAR-denominated SwapClear Contracts, and to adopt the daily fixing of ZARONIA as the rate for determining PAI and PAA payable in respect of such contracts. 

In fulfilment of the adoption of ZARONIA for the purposes articulated above, LCH SwapClear will perform a non-compensated PAI / PAA and Discounting transition on Saturday 11 April 2026 [Note 4].

While there are technical grounds to apply compensation for the change in PAI / PAA (from SAFEX to ZARONIA), these are outweighed by practical factors, such as the current absence of a representative spread between SAFEX and ZARONIA. Therefore, a non-compensated transition is the most appropriate route.

To note, this change will not affect the coupon payments on any existing trades, which will remain linked to their original benchmark rates (e.g. ZAR JIBAR 3M in case of ZAR JIBAR SwapClear Contracts).

Finally, as from and including Monday 13 April 2026, any ZAR-denominated swap cleared by SwapClear will, from the point of clearing, be discounted using ZARONIA OIS and use ZARONIA in the price alignment process. For the avoidance of doubt, swaps linked to ZAR JIBAR will remain eligible for clearing at SwapClear beyond this date and until further notice.

The process described herein remains subject to risk governance and legal and regulatory review.

If you have any questions, please contact RatesClientServices@lch.com.