Update on the ZARONIA First initiative and first sequencing for Non-Linear and Cross Currency Derivatives

1
FSCA COMMUNICATION 22 OF 2025 (FM)
Update on the “ZARONIA First” initiative and first sequencing for Non-Linear and Cross Currency Derivatives

1. PURPOSE
   The purpose of this communication is to remind stakeholders and market participants of the impending change from Johannesburg Interbank Average Rate (JIBAR) to South African Rand Overnight Index Average (ZARONIA) and to encourage inter-dealer participants to adopt ZARONIA-based conventions for Non-Linear and Cross Currency Derivatives.
2. BACKGROUND
   2.1 In November 2024, the South African Reserve Bank (SARB)’s Market Practitioners Group1
   (MPG) published recommendations related to the ZARONIA First initiative, which is a phased approach to transitioning the interest rate derivatives market (see here)
   2.2 Driven by the SARB and the MPG, this strategic initiative represents a significant milestone
   in aligning South Africa’s financial markets with international standards. Central to the initiative is a transition in trading conventions—from the forward-looking, panel-based JIBAR to ZARONIA, a benchmark grounded in actual overnight transactions. This change is designed to enhance transparency and promote greater market stability.
   2.3 On 24 April 2025 the FSCA published FSCA Communication 9 of 2025 (FM) - Support for the
   “ZARONIA First” initiative and first sequencing for Linear Derivatives (see here) confirming its support for the ZARONIA First initiative and encouraging stakeholders to adopt ZARONIA￾based conventions for linear derivatives. “ZARONIA First” for Linear Derivatives commenced on 30 April 2025. Following the implementation, volumes in ZARONIA Overnight Indexed Swaps (OIS) have increased steadily with market participants reflecting continued overall improvement in liquidity conditions.
3. KEY ASPECTS OF THE “ZARONIA FIRST” INITIATIVE FOR NON-LINEAR and CROSS
   CURRENCY DERIVATIVES
   Timeline and Implementation of first sequencing for Non-Linear and Cross Currency Derivatives
   3.1 From 31 October 2025, inter-dealer brokers are encouraged to replace primary quoting of
   Non-Linear and Cross Currency Derivatives using ZARONIA as the primary benchmark.
   3.2 The use of JIBAR is not prohibited, and inter-dealer trading screens referencing JIBAR should
   continue to be accessible.
   1 The MPG is a joint public and private sector committee, comprising representatives from the SARB, the Financial Sector Conduct Authority (FSCA), and senior professionals from a variety of institutions from different market interest groups active in the domestic capital market.

2
3.3 As mentioned in FSCA Communication 9 of 2025 (FM) it is important to note that this initiative
targets the inter-dealer market. Transactions between dealers and clients that reference JIBAR are not affected by the recommendation. Market Infrastructure
3.4 To aid the transition from JIBAR to ZARONIA, clearing houses like LCH SwapClear have
onboarded clearing capability onto its platform for ZARONIA-based derivatives.
3.5 The MPG has made steady progress to implement the required infrastructure underpin to
transact Non-Linear and Cross Currency Derivatives – these include: screen pricing development, trade processing systems, industry test trades as well as regular interaction with relevant Market Makers.
4. CONCLUSION & ENQUIRIES
4.1 The “ZARONIA First” initiative for Non-Linear and Cross Currency Derivatives marks another
significant step forward for South Africa’s financial markets. A successful transition to ZARONIA relies on strong collaboration across the financial sector. Active engagement from banks, asset managers, and other market participants is essential to help build sufficient liquidity in ZARONIA-linked financial instruments.
4.2 The FSCA further strongly encourages all participants in the inter-dealer market to adopt
ZARONIA-based conventions for Non-Linear and Cross Currency Derivatives commencing 31 October 2025. Ongoing regulatory support from both the SARB and the FSCA will focus on providing clear implementation guidance and equipping the market with the necessary tools to manage the transition effectively.
4.3 For any queries regarding this communication, please email Kedibone Dikokwe at
Kedibone.Dikokwe@fsca.co.za .
ASTRID LUDIN
DEPUTY COMMISSIONER
FINANCIAL SECTOR CONDUCT AUTHORITY
Date of publication: 31 October 2025