Friday, 9 September 2022

Back to SOFR First - LIBOR Futures transition

A couple of weeks ago we were back to LIBOR First, this week we continue the back and forth and it is ... SOFR First.

Figure 1: Weekly share by product types at LCH

On the LIBOR futures side, CME has announced its proposed conversion date for the LIBOR futures to SOFR futures: 14 April 2023. It is a good news that we now have a date. But it also means that anybody who has traded a post June 2023 LIBOR futures in the last years did not know what he was trading! The cessation of LIBOR in June 2023 has been announced a couple of years ago (on 5 March 2021) but the LIBOR fallback for one of the most liquid LIBOR instrument is only announced now. Actually it is not even the definitive fallback that is announced now, but only a "proposal" that has still to go through regulatory approval and consultation. 

What is the impact of choosing the date 14 April 2023 on the pricing of the futures? If you cannot answer that question, maybe you need external help/advise on the transition. A detail answer is part of our "Benchmarks in transition" course.

Don't hesitate to contact us if you are interested by benchmark transition advisory or training.