Alternative Reference Rates Committee releases update on selection of SOFR Term Rate Administrator

On 21 May 2021, the Alternative Reference Rates Committee (ARRC) announced that it had selected CME Group as the administrator for the forward-looking Secured Overnight Financing Rate (SOFR) term rates (Term SOFR), once market indicators for the Term SOFR are met (please see link).

In connection with market indicators, the ARRC published an announcement on 6 May 2021 which summarised the following indicators that it would consider in order to recommend the use of Term SOFR:

(a) 

Continued growth in overnight SOFR-linked derivatives volumes.

(b) 

Visible progress to deepen SOFR derivatives liquidity, consistent with ARRC best practices:

i. 

Offering electronic market-making and execution in SOFR swaps and swap spreads.

ii. 

Changing the market convention for quoting USD derivative contracts from LIBOR to SOFR.

iii. 

Making markets in SOFR-linked interest rate volatility products (including swaptions, caps, and floors).

(c) 

Visible growth in offerings of cash products, including loans, linked to averages of SOFR, either in advance or in arrears.

For more details on the aforesaid announcement by the ARRC, please see here.