In November, the Commodity Futures Trading Commission (CFTC) published a Request for Information and Comments on Swap Clearing Requirement Amendments to Account for the Transition from LIBOR and Other IBORs to Alternative Reference Rates. In this request, the CFTC asks a wide range of questions around the transition to swaps referencing alternative rates, for instance requests to derivatives clearing organizations on volumes, assessment of their ability to perform auctions or to port SOFR positions in case of a futures commission merchant default before the conversion in 2023, questions about conversion experiences, other rates like Ameribor and BSBY, pricing and liquidity of alternative reference rate products etc.

In the response, ISDA makes – in line with responses to the Bank of England and the European Securities and Markets Authority – the point that its members clear a lot of these products voluntarily already but would welcome a clearing mandate to avoid bifurcation of liquidity. We ask for international alignment and sufficient notice before a clearing requirement is enacted. ISDA also asks to exempt transactions stemming from post trade risk reduction from the clearing requirements and to keep in mind the impact of a clearing requirement on a trade execution requirement.