On May 9, 2022, the U.S. Commodity Futures Trading Commission (CFTC or Commission) proposed amendments to the CFTC’s mandatory clearing requirements for interest rate swaps (the Proposal).1 The Proposal represents another phase in the ongoing global effort to transition away from interbank offered rates (IBORs), such as the London Interbank Offered Rate (LIBOR), and toward alternative risk-free reference rates (RFRs). Under the Proposal, swaps referencing certain overnight RFRs, including the Secured Overnight Funding Rate (SOFR), would become subject to mandatory clearing, and swaps referencing LIBOR would no longer be subject to mandatory clearing.
The Proposal has long been awaited and we expect that the CFTC will act quickly to adopt it in substantially the form in which it has been proposed, following a 30-day comment period ending June 30, 2022.
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