Sunday, 28 February 2021

Marc quoted in the press: Practice Insight - IFLR

Marc was quoted in the press in an article related to the LCH steering away from ISDA fallback: Industry broadly supports LIBOR big bang switch (subscription required).

The quotes are

While the proposal crafted by LCH may look like an ideal solution for many market participants, it could come at a price, which some deem too high. “I encouraged my clients to consider this approach even before it was proposed by LCH, but we should bear in mind that clearinghouses look at what is in their books – not at the market,” said Marc Henrard, managing partner at muRisQ Advisory.. “They want to push the bifurcation problem out to end-users, who in turn will have to deal with the issue on their bilateral trades and manage the bilateral-to-cleared basis risk."

Bringing forward this proposal earlier and presenting a common mechanism that can also apply to bilateral trades would have made for a smoother process, Henrard added.
and
In addition, there is a risk that LCH's solution could fragment the swaps market, as liquidity will be split between the trades referencing RFRs and those using ISDA’s fallback rates. “Market participants should make sure they have the right tools in place to compute any small residual valuation difference,” said Henrard. “LCH’s proposal may not work out to everyone’s advantage, and some may want to adjust their positions ahead of the big bang.”