United States: CFTC MRAC Subcommittee Selects “SOFR First” Date For Additional Cross-Currency Derivatives
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The Interest Rate Benchmark Reform Subcommittee of the CFTC
Market Risk Advisory Committee selected December 13, 2021, as the date for
switching interdealer trading conventions for U.S. dollar newly
executed cross-currency derivatives from LIBOR to SOFR.
The Subcommittee announced the date as part of its rollout under
the Committee’s “SOFR First” initiative. As previously covered, the SOFR First initiative
calls for a four-phase transition from LIBOR to SOFR for U.S.
dollar linear interest rate swaps, cross-currency swaps, non-linear
derivatives, and exchange-traded derivatives and others. For SOFR
First purposes, cross-currency basis swaps with one leg of the
transaction quoted in USD are considered cross-currency
derivatives. The forthcoming final phase of SOFR First will concern
exchange-traded derivatives.
In a related FAQ, the Subcommittee clarified (i) the
relationship between the SOFR First cross-currency derivatives
recommendation and its September 21, 2021 Risk-Free Rates First
date for cross-currency derivatives, (ii) whether end users can
still execute USD LIBOR cross-currency derivatives after December
13, 2021, and (iii) recommended trade conventions for SOFR/RFR or
SOFR/IBOR interdealer cross-currency derivatives.
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