Market guidance issued by ISDA for SOFR swap effective dates

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Authored by: Simon Deane and Ruby Hui

ISDA has released a market practice note (“MPN”) relating to the effective dates for SOFR swaps using different payment or reset date calendars. The effective date for SOFR swaps is usually two business days following the trade date in the market. Historically, it has been seen that these two business days could be “New York Business Days”, “U.S. Government Securities Business Days” or both in the market, and this inconsistency has caused confusion. For instance, 15 April 2022 was a New York Business Day but not a U.S. Government Securities Business Day.

In response to this discrepancy, ISDA suggests that market participants refer to both of “U.S. Government Business Days” and the “New York Business Days” for the purposes of determining the effective dates for SOFR swaps. Therefore, only a day which is both a “U.S. Government Securities Business Day” and a “New York Business Day” could potentially become an effective date for a SOFR swap. However, it is totally at the discretion of market participants as to whether such a recommendation should be adopted.

The MPN is available here.

Key Contacts

Simon Deane

Consultant | Banking and Finance

Email or call +852 2825 9209