Release Number 8214-20

CFTC Market Risk Advisory Committee Approves Subcommittee’s Single-Step Transition Recommendations at Public Meeting

July 30, 2020

— The Commodity Futures Trading Commission’s Market Risk Advisory Committee (MRAC) approved recommendations regarding the scheduled October 2020 transition of discounting and price alignment interest for certain products to the secured overnight financing rate (SOFR), otherwise known as the “Single-Step Transition,” at its July 21, 2020 public meeting.  Commissioner Rostin Behnam is the sponsor of MRAC. 

The recommendations, in the MRAC Interest Rate Benchmark Reform Subcommittee’s report on its June 2, 2020 table top exercise on the transition, aim to provide next steps that market participants can take to better improve education, risk management, and internal preparedness with respect to the transition, as well as points of consideration for market regulators. The recommendations represent 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.    

“As benchmark reform efforts continue moving forward around the globe, the MRAC’s Interest Rate Benchmark Reform Subcommittee also continues to provide the Commission and market participants with timely recommendations to consider in support of a smooth transition away from LIBOR. The recently held table top exercise, conducted through the MRAC in June 2020, yielded additional recommendations that will further support the critical discounting and price alignment interest transition to SOFR at CME Clearing and LCH Limited later this year,” said Commissioner Behnam.

The recommendations are the subcommittee’s second set of recommendations in connection with the transition of U.S. dollar derivatives and related contracts away from LIBOR. The recommendations will be submitted to the Commission for consideration.