Negative Rates

While policy makers have announced that they do not plan to introduce negative interest rates in the U.S., SIFMA and its member firms are working to understand what a potential move to negative rates in the future could mean for securities markets and their participants, and to help firms understand how they should be assessing their readiness for a potential negative interest rate environment.

Our goal is to help the industry understand how potential negative rates could affect firms – across operations, technology, compliance, and product specific issues – and to develop a readiness implementation checklist outlining key implementation considerations for member firms.

Outside the U.S., firms have been exposed to negative rates following the move by the European Central Bank to first introduce negative rates on some products in 2014. In the succeeding years, participants in European and Japanese securities markets have worked with products paying negative rates.

The introduction of negative rates in U.S. markets could bring a range of challenges to market participants. A broad range of products would likely be impacted by a move to negative rates, each with distinct operational and market challenges. In addition, firms would need to understand technical challenges – given the foundational importance of interest rates to a broad range of markets and products, numerous internal firm systems and processes as well as services offered by third party vendors and infrastructure providers would need to be reviewed to understand their capacity to support transactions involving negative rates. Firms would also need to review enterprise level issues such as compliance, technology, risk management, and client communications.

SIFMA has formed a working group to develop collective industry insights on operational impacts of negative interest rates scenarios, and develop tools and frameworks to help firms understand and prepare for any potential impacts to minimize any disruption to their operations, products, and client services.

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