CME Group, the Term SOFR administrator, recently made a couple of important announcements. First, its Term SOFR data are now available for licensing for use in cash market financial products and OTC derivative products. Until now CME Group previously limited Term SOFR data to making loans. Their terms of use, which did not allow the data to be used for Term SOFR derivatives, have been updated with details on licensing.
Of equal importance, BSBY futures are live. As a complement to BSBY futures and SOFR-based offerings, CME Group also announced that it will launch Cleared BSBY swaps for both outright OIS and basis swaps beginning November 15, subject to regulatory review.
An active derivatives market is crucial to the development of Term SOFR and BSBY. With the availability of Term SOFR swaps, Term SOFR seems poised to replace LIBOR as the dominant rate in the loan market. As we discussed in our prior Alert, regulators, and SEC chair Gary Gensler in particular, have expressed considerable reservations with BSBY. It will be interesting to see how trading and loan volume in both rates develop.