As the countdown to the LIBOR sunset enters its final six months, the CFTC staff is trying to help the market transition.

By Yvette D. Valdez and Deric Behar

With less than six months to go before the London Interbank Offered Rate (LIBOR) expires on December 31, 2021, regulators around the world have been amplifying already loud calls for market participants to switch to alternative reference rates. In many cases, those calls have been accompanied by significant regulatory efforts and policy shifts to ween the market off reliance on LIBOR. In particular, the US Commodity Futures Trading Commission (CFTC) has been focused on helping the trillion-dollar USD LIBOR interest rate swap market navigate the transition.

Along with other regulatory authorities such as the Federal Reserve Board, the Financial Stability Board, the International Organization of Securities Commissions, the Alternative Reference Rates Committee (ARRC), and the International Swaps and Derivatives Association, the CFTC has been working to steer the derivatives market to safety before the LIBOR clock runs down. On July 13, 2021, the CFTC’s Market Risk Advisory Committee (MRAC) adopted SOFR First, a market best practice recommendation developed by MRAC’s Interest Rate Benchmark Reform Subcommittee. The Subcommittee previously recommended SOFR First on June 8, 2021, and provided an informative set of frequently asked questions.