In July 2021, ISDA responded to a Bank of England (BoE) consultation on the inclusion of transactions referencing certain risk-free rates (RFRs) into the clearing obligation. In addition, the BoE released a supplementary consultation on the inclusion of swaps referencing TONA in September, which ISDA responded to on October 26, 2021.
ISDA members support the BoE’s proposal to adapt the derivatives clearing obligation under the UK’s European Market Infrastructure Regulation in the context of interest rate benchmark reform. ISDA members acknowledge the benefits of central clearing, as demonstrated by the current clearing rates for RFR swaps. Introducing a clearing obligation for these products could be a helpful tool to avoid liquidity fragmentation.
However, transactions stemming from post-trade risk-reduction exercises should be exempt from the clearing obligation to enable market participants to manage the risks in their non-cleared portfolios.
While not strictly in scope of this consultation, the effect of a clearing obligation for over-the-counter RFR-linked derivatives on the derivatives trading obligation (DTO) should be kept in mind. This should be carefully and independently analyzed, as it could have a detrimental impact on the market. Transactions not subject to the clearing obligation, such as IBOR swaps, should be removed from the scope of the DTO.
ISDA members also support a clearing obligation for TONA swaps, but recommend sufficient time to enact all changes to systems (internal and external) and control frameworks. ISDA members would welcome confirmation that the BoE or other UK authorities will not use their supervisory power if insufficient notice is provided between the BoE final policy statement and the effective date of the rule.
Documents (2) for ISDA Responds to BoE Consultation on RFR Clearing Obligation
Latest
ISDA Response to EC on Environmental Legislation
On September 10, ISDA, the Association for Financial Markets in Europe (AFME) and the European Fund and Asset Management Association (EFAMA) submitted a joint response to the European Commission’s (EC) call for evidence on reducing the administrative burden in environmental...
Credit Derivatives Trading Activity Q2 2025
This report analyzes credit derivatives trading activity reported in Europe. The analysis shows European credit derivatives transactions based on the location of reporting venues (EU versus UK) and product type. The report also compares European-reported credit derivatives trading activity to...
ISDA Trading and Treasury Forum: CEO Remarks
ISDA Derivatives Trading and Treasury Forum London, September 16, 2025 Opening Remarks Scott O’Malia ISDA Chief Executive Officer Good morning, and welcome to the ISDA Derivatives Trading and Treasury Forum. Thank you to CME Group for partnering with us...
Recognition of Cross-product Netting is Critical
US regulators are in the process of making important changes to the regulatory capital framework by proposing modifications to the enhanced supplementary leverage ratio, which should help stop it from acting as a non-risk-sensitive constraint on bank capacity – a...