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Aaron Levy is special counsel in the Finance and Bankruptcy Practice Group in the firm's New York office.

As expected, on July 28, 2021, the Alternative Reference Rates Committee (ARRC) formally recommended the CME’s SOFR Term Rate.  The SOFR Term Rate is known in advance of the related interest period and provides an indicative, forward-looking measurement of SOFR based on market expectations implied from leading derivatives markets.  In this respect, the SOFR Term Rate functions in a manner similar to today’s LIBOR rates.  In contrast, the Daily Simple SOFR or Daily Compounded SOFR used for interest periods beyond overnight can only be determined in arrears.  The SOFR Term Rate thus facilitates in a significant way the transition away from the current LIBOR markets.

Continue Reading ARRC Formally Recommends Term SOFR

This past Monday, July 26, marked passage of the most recent major milestone in the replacement of LIBOR as the benchmark USD interest rate.  Following the recommendation of the CFTC’s Market Risk Advisory Committee (MRAC) Interest Rate Benchmark Reform Subcommittee, on July 26, 2021 interdealer brokers replaced trading in LIBOR linear swaps with SOFR linear swaps.  This switch is a precursor to the recommendation of SOFR term rates.  The switch does not apply to trades between dealers and their non-dealer customers.

Continue Reading Latest Milestone in LIBOR Replacement Passed