Release Number 8171-20

CFTC Market Risk Advisory Committee’s Interest Rate Benchmark Reform Subcommittee Holds Table Top Discussion and Revises Membership

June 02, 2020

— The Commodity Futures Trading Commission Market Risk Advisory Committee’s (MRAC) Interest Rate Benchmark Reform Subcommittee (Subcommittee) held a virtual table top discussion earlier today regarding CME Clearing (CME) and LCH Limited’s (LCH’s) single-step proposals for the transition of discounting and price alignment interest for certain products to the secured overnight financing rate (SOFR), scheduled for October 2020. CFTC Commissioner Rostin Behnam is the sponsor of MRAC. 

The five-hour interactive discussion among Subcommittee members used scenario analysis to identify areas that could strengthen the current discounting transition proposals. The exercise provided valuable insight into overall market preparedness. At a future public meeting of the MRAC, the Subcommittee will furnish a report highlighting lessons learned from today’s exercise and identifying any potential action items that emerged from the discussions.

“The tabletop exercise is the culmination of several months of work by the MRAC Subcommittee on Interest Rate Benchmark Reform. The CCP discounting shift in October 2020 marks a fundamentally important event in the transition to robust alternative reference rates. Market participants anticipate that insights drawn from the MRAC Subcommittee’s tabletop exercise will inform critical and fast approaching decision points. We thank Commissioner Behnam for his sponsorship of the Subcommittee, the CFTC for holding the exercise, and CME and LCH for their direct involvement,” said Tom Wipf, Subcommittee Chair and Vice Chairman of Institutional Securities at Morgan Stanley and Chair of the Alternative Reference Rates Committee.

Pursuant to the renewed MRAC charter, the Subcommittee has revised its membership to appoint organizations as members. The Subcommittee now has 32 members which represent a wide array of market participants that have a high-level of expertise and experience with interest rate benchmarks, as well as the London Inter-bank Offered Rate (LIBOR) transition efforts. Tom Wipf will continue to serve as the Subcommittee’s chairman.

“Today’s table top exercise represents another important step in the MRAC’s multi-year effort to support the work of the Federal Reserve Board and New York Fed’s Alternative Reference Rates Committee by identifying and resolving transition issues within the derivatives market. During today’s exercise, Subcommittee members were able to actively work through potential scenarios and identify operational challenges, further highlighting the critical importance of the single-step transition later this year. Special thanks to all the Subcommittee members, Tom Wipf, CME and LCH for their preparation before the exercise, and to the new organizational members” said Commissioner Behnam. 

The Subcommittee was established to provide reports and recommendations to the MRAC regarding ongoing efforts to transition U.S. dollar derivatives and related contracts from LIBOR to SOFR, and the impact of such transition on the derivatives markets. 

See full list of MRAC Interest Rate Benchmark Reform Subcommittee members here.