Benchmark fallbacks are replacement rates that would apply to derivatives trades referencing a particular benchmark. These would take effect if the relevant benchmark becomes unavailable while market participants continue to have exposure to that rate. Specific fallback rates are set out in the 2006 ISDA Definitions. ISDA is working on new robust fallbacks that would apply in the event of a permanent cessation of a key interbank offered rate (IBOR).
ISDA plans to publish a supplement to the 2006 ISDA Definitions in July to incorporate new fallbacks for derivatives that reference certain key interbank offered rates. Simultaneously, ISDA will publish a protocol that will allow market participants to choose to incorporate the revisions into their legacy derivatives trades.
Ahead of the publication, ISDA has published a new factsheet that explaining why changes to fallbacks are necessary.