Surge in SOFR Derivatives Bodes Well for Shift
- Volume also buoyed by a major switch in the swaps market
- FCA death notice on Libor may come in November or December
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A rush of additional trading in derivatives linked to the heir presumptive to Libor bodes well for the transition to a new standard reference rate for dollar funding markets.
Activity in interest-rate swaps linked to the Secured Overnight Financing Rate has surged this month, with volume reaching $84 billion as of Oct. 21, a near tripling of the figure for all of September, according to an analysis of CME Group figures by TD Securities. Trading has risen in the wake of the so-called big-bang switch for swaps, which saw SOFR replace the effective federal funds rate in calculations that value the instruments, and the launch of a new legal protocol to open the way for a wider adoption of alternative benchmarks.