The Australian Financial Markets Association has clarified the definition of the AUD Overnight Index Average (AONIA), the alternative benchmark to the one-month bank bill swap rate.

In a market notice, AFMA said that AONIA is the published screen rate for the Reserve Bank cash rate (displayed on the Refinitiv screen RBA30 page “or on any successor screen pages”).

The updated definition covers the rebranding of Reuters to Refinitiv, and also makes clear that AONIA is the same rate as the RBA calculated cash rate.

“It has no independent calculation methodology or characteristics,” AFMA said.

Another clarification is that AONIA is based on the cash rate, not the cash rate target.

AONIA has been the officially sanctioned alternative reference rate for Australian dollar-based transactions since June 2018, when ASIC declared that BBSW and AONIA were “significant financial benchmarks.”

Unlike other markets, where interbank offer rates (IBOR) are being phased out, BBSW will continue to be used in Australia.

However, S&P Global Ratings has said that changes to liquidity coverage ratio requirements for Australian authorised deposit-taking institutions have resulted in lower volumes of one-month bank bills issued to investors and, therefore, lower liquidity compared with three and six-month paper.

S&P said the RBA has been encouraging financial market participants to consider whether an alternative benchmark to one-month BBSW should be used as the reference rate for interest payments on Australian residential mortgage-backed securities.

Meanwhile, ASX Benchmarks, the BBSW administrator, is working to improve the robustness and longevity of BBSW.

Earlier this month it announced a plan to widen the maturity pool for eligible trades used for calculating the bank bill swap rate. Its aim is to increase the number of transactions used to form the rate and increase the frequency with which the rate will be set.