LCH and Benchmark Reform

Industry-wide efforts to transition to new interest rate benchmarks are now well underway, driven by the need to use rates that are truly representative of their underlying market. As activity in the unsecured interbank funding market continues to slow, legacy interbank offered rates (IBORs) such as LIBOR may not reflect market costs. As a result, if IBORs cease to be published beyond 2021, or they are no longer representative, participants will need to shift to recommended alternatives – the Secured Overnight Financing Rate (SOFR) in the case of the US dollar (USD) market, and the Euro Short Term Rate (€STR) for the euro (EUR) market, for example.

Supporting Benchmark Reform

It is crucial that market participants are properly equipped to manage a smooth and orderly transition to the alternative risk-free reference rates (RFRs). As strong proponents of these benchmark reform initiatives, we continue to collaborate with our market partners to deliver innovative clearing solutions that are providing early liquidity and accelerating adoption of the new RFRs.
 
Work has been organised along currency lines, and industry-wide progress is being driven by working groups established by national central banks and modelled as public-private partnerships. We are working closely with ISDA and other industry bodies on the key issues, such as pre-cessation triggers, to ensure we meet the needs of our customers while continuing to mitigate systemic risk.
 
For more information on benchmark reform in the EUR and USD markets, and all other markets we clear, please follow the links below.

EUR Market USD Market Other Markets
Benchmark Reform – EUR Market

Shortly after the introduction of the new Euro Short Term Rate (€STR) in October 2019, LCH launched the industry’s first clearing service for swaps referencing the new benchmark – a critical step for the development of an active, liquid market. 

We are now working closely with industry bodies, such as the Euro RFR Working Group and ISDA, and our user base to ensure clarity around the transition process.

Please use the resources below to learn more about the key issues around €STR, and find out how LCH is enabling customers to make a smooth, orderly transition to the new risk-free rate (RFR).

Benchmark Reform – USD Market

The pending shift from LIBOR to the Secured Overnight Financing Rate (SOFR) is a huge undertaking for the US dollar (USD) interest rate derivatives market, the world’s largest. In July 2018, LCH launched the industry’s first clearing service for USD interest rate swaps (IRS) referencing SOFR – a critical step for developing a liquid market in SOFR derivatives and driving its adoption.

We are now working closely with industry bodies, such as ARRC and ISDA, and with our user-base, to ensure clarity around the transition process.

Please use the resources below to learn more about the key issues around SOFR, and find out how LCH is enabling customers to make a smooth, orderly transition to the new benchmark.

Benchmark Reform – Other Markets

At LCH, we support reform across all the currencies and benchmarks we clear, including AUD, CHF, GBP, JPY and SGD. Please use the resources below for regulatory, industry and product updates, and find out how LCH is enabling customers to make a smooth transition to the alternative risk-free reference rates (RFRs).