In remarks before the Market Risk Advisory Committee ("MRAC") Chair Heath Tarbert and Commissioner Rostin Behnam highlighted CFTC efforts to facilitate the transition from USD LIBOR-based swaps to SOFR-based swaps.
In his remarks, Mr. Tarbert warned of the risks posed by the use of LIBOR during a period when the rate was no longer representative (so called, "Zombie LIBOR"). He noted that various proposals are being discussed to avoid the risks of a Zombie LIBOR, including providing for pre-cessation triggers in swaps referencing LIBOR. He also stated that the CFTC is likely to be the first regulatory agency to provide LIBOR-transition-related relief in the form of a series of no-action letters, expected by December 20, 2019.
At the same Committee meeting, Commissioner Rostin Behnam outlined MRAC initiatives to support the transition from LIBOR, such as:
- approving "plain English" disclosures for new derivatives referencing LIBOR;
- providing market data and regulatory relief; and
- underlining challenges that still remain, including (i) avoiding significant market disruption and (ii) determining how the United States and other non-European markets should respond if LIBOR is determined to be non-representative, even if still published.
In addition, Mr. Behnam listed the reports and subcommittee updates that were considered at the meeting (which can be found here.)
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