U.S. Alternative Reference Rate Developments
The Alternative Reference Rates Committee (ARRC) is a group of market participants and official-sector entities convened by the U.S. Federal Reserve Board to help ensure successful adoption of its recommended alternative, SOFR and improved IBOR fallbacks. The ARRC’s Paced Transition Plan has encouraged adoption of SOFR in cash and derivatives markets and contributed to the development of the derivatives market, as set out in the timeline below.
Following the SOFR benchmark’s first publication in April 2018, CME Group launched SOFR futures in May 2018. CME Group also added OTC clearing capabilities for SOFR-based interest rate swaps in October 2018. These initiatives are progressing very well, with 3.5M SOFR futures traded in the first year.
CME Group continues to work with clients and regulators to ensure that each step of the Paced Transition Plan is widely supported by market participants. For example, we are collaborating with market participants on how to accelerate SOFR’s use in price alignment and discounting in OTC USD derivatives in place of the Fed Funds rate.