Conversion of Cleared LIBOR Swaps to SOFR: the process, key dates, and more
Overview
The transition from LIBOR to SOFR is progressing. June 30, 2023 is the LIBOR cessation date, but there are several key dates and factors to know in advance, particularly for participants holding legacy LIBOR positions with fixing dates beyond summer 2023. Our video series discusses the ins and outs of the conversion methodology, as well as the additional factors firms need to know as the planned conversion process approaches.
- Introduction and overview of CME Group’s conversion plan – Explores key dates to know, which USD LIBOR swaps will be impacted, and how replacement swaps will function.
- Conversion methodology and a detailed example – Details the underlying methodology CME Group will leverage for the primary conversion process, including an example scenario.
- Available resources and operational processing considerations – Discusses the operational timeline for the night of the primary conversion, indicative analysis reporting (available in Q1 2023), and dress rehearsal dates.
- Special cases and conclusion – Explores the planned basis swap splitting event, as well as the secondary conversion process for zero coupon swaps and other special cases.
Conversion of cleared USD LIBOR swaps to SOFR: Video Series
Video 1: Introduction and Overview
Video 1 includes:
- Background on why CME Group will convert legacy cleared USD LIBOR swaps to SOFR, highlighting which USD LIBOR swaps will be subject to conversion and which swaps will not.
- Mechanics behind the planned primary conversion process scheduled for April 21, 2023.
Video 2: Conversion Methodology
Video 2 includes:
- Detailed look into the underlying methodology CME Group will use for the conversion process.
- In-depth example of how the conversion methodology will be applied.
Video 3: Resources and Operational Considerations
Video 3 includes:
- Timeline for operational processing of the primary swap conversion on April 21, 2023.
- Dress rehearsal dates in January, February, and March to help provide testing opportunities for clearing members.
- Overview of indicative analysis reports that will show the net present value, cash compensation, and economic terms for the replacement swaps firms will receive based on their production portfolio.
Video 4: Special Cases
Video 4 includes:
- Overview of the mandatory basis swap splitting event scheduled for March 24, 2023. Fed Funds vs. LIBOR basis swaps are not in scope for the splitting exercise.
- Special cases included in the secondary conversion process: How CME Group will proceed with zero coupon swaps, swaption assignments, and any remaining in-scope LIBOR exposure in a daily conversion process beginning on July 3, 2023.
Contact Us
For more information about the USD LIBOR cleared swap conversion and how CME Group can help you prepare, please contact a member of our Rates team:
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
