Like in previous consultation summaries of responses, muRisQ responses are largely quoted in the document. A first version of the answer appeared on Marc's blog: Pre-cessation it will be :(
One of the summary sections provide an highlight of the reason behind our negative answer to the pre-cessation question:
51.In contrast, a European professional services firm emphasized that “[i]n the current master agreements, the only event that leads to a fallback is the non-publication of the rate, there is no notion of announcement date and even less pre-cessation trigger. A pre-cessation trigger forces extra complexity and increases the fragmentation of the market. Legacy trades only have non-publication as a trigger, adding a pre-cessation trigger create a discrepancy between the trades under the new definitions and the legacy trades. The discrepancy would make it more complex to hedge the legacy book. A new fragmentation of the market will be created.” This entity noted, “To achieve the required exposure on new trades, the fallback has to be trigger as late as possible. Any pre-cessation trigger is a negation of the trade existence itself. The LIBOR fixing, even if not perfect or deemed not representative by a third party – e.g., a regulator – is better than a fixing based on a RFR plus a spread which is not credit and liquidity dependent. Fallback should be a last resort mechanism and used only in last resort. The pre-cessation event is not an event requiring last resort. The estimation by a single entity, even a regulator, without review and recourse mechanism in place, regarding a major interest rate standard that has been working for more than 30 years and is still working, should not be consider as a case of last resort.”
Don't fallback, step forward!
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