Swap guidance continues LIBOR transition

A Commodity Futures Trading Commission panel recommended best practices for switching interdealer trading conventions from LIBOR to the Secured Overnight Financing Rate in U.S. dollar interest rate swaps.

What’s New: Specifically, the CFTC panel recommended that interdealer brokers change linear swap trading conventions from LIBOR to SOFR on July 26.

Impact: The Alternative Reference Rates Committee—which is implementing the LIBOR transition — said the convention switch will accelerate the shift and allow it to formally recommend SOFR term rates.

Pending Deadline: The U.K. Financial Conduct Authority has said it will cease publishing LIBOR for the one-week and two-month settings immediately after Dec. 31, 2021. U.S. regulators last fall encouraged banks to cease entering new USD LIBOR contracts by that date.

Transition: The ARRC — on which ICBA serves — encourages market participants to continue the transition using available tools.