ISDA members are supportive of the Bank of England’s (BoE) consultation on adapting the UK EMIR derivatives clearing obligation (CO) under UK EMIR in the context of the on-going interest rate benchmark reform. We also welcome the opportunity to provide further feedback through this supplementary consultation on Overnight Index Swaps (OIS) referencing SOFR.

ISDA members acknowledge the benefits of central clearing, as demonstrated by the current clearing rates for risk free reference rate (RFR) swaps. We believe that introducing a CO for OIS referencing SOFR could be a helpful tool for avoiding liquidity fragmentation.

We welcome that the BoE is trying to provide sufficient notice for firms to get prepared for the changes, both for the inclusion of SOFR OIS and for the removal of USD LIBOR contracts.

While not in scope of this consultation, we also ask that the subsequent impact of a CO for OIS referencing SOFR on the derivatives trading obligation (DTO) under UK MiFIR be kept in mind. This impact should be carefully and independently analysed as it could have detrimental impacts on the market. Transactions no longer subject to the CO (swaps referencing USD LIBOR swaps) should also be automatically removed from the scope of the DTO.