CFTC Subcommittee Recommends July 26, 2021 for LIBOR-to-SOFR Transition in Interdealer Swap Market Trading | Practical Law

CFTC Subcommittee Recommends July 26, 2021 for LIBOR-to-SOFR Transition in Interdealer Swap Market Trading | Practical Law

The CFTC's Interest Rate Benchmark Reform Subcommittee recommended July 26, 2021 as the date for interdealer swap market trading to transition from LIBOR to SOFR.

CFTC Subcommittee Recommends July 26, 2021 for LIBOR-to-SOFR Transition in Interdealer Swap Market Trading

by Practical Law Finance
Published on 15 Jun 2021 • USA (National/Federal)
The CFTC's Interest Rate Benchmark Reform Subcommittee recommended July 26, 2021 as the date for interdealer swap market trading to transition from LIBOR to SOFR.
On June 8, 2021, the CFTC's Interest Rate Benchmark Reform Subcommittee recommended a market best practice (referred to as SOFR First) for the transition from LIBOR to the Secured Overnight Financing Rate (SOFR) for US dollar linear interest rate swaps (IRS) These recommendations apply only to the interdealer market and do not impact LIBOR linear swap transactions between dealers and customers.
The subcommittee, which is part of the CFTC's Market Risk Advisory Committee (MRAC), specifically recommends that:
  • Interdealer brokers begin trading SOFR linear IRS in place of LIBOR linear IRS from July 26, 2021 onward. SOFR First believes this will cause trading activity among swap dealers on these platforms, which account for a substantially large share of trading in the interest rate swap markets, to switch from LIBOR to SOFR.
  • Interdealer broker screens for LIBOR linear swaps continue to be available until October 22, 2021 for informational purposes only.
The subcommittee's recommendations will be submitted to MRAC for additional consideration. For more information on the CFTC's LIBOR transition actions, see CFTC's SOFR First Transition FAQs.