The U.S. Commodity Futures Trading Commission’s Market Risk Advisory Committee (MRAC) approved plain English disclosures for new derivatives referencing the London Interbank Offered Rate (LIBOR) and other IBORS.
This standard set of disclosures were prepared by the MRAC’s Interest Rate Benchmark Reform Subcommittee. They are intended as an example of “plain English” disclosures that market participants could use, as they deem appropriate, with all clients and counterparties with whom they continue to transact derivatives referencing LIBOR and other IBORs. These “plain English” disclosures are designed to be easy-to-understand to inform clients and counterparties about the implications of using such products.
“I commend the MRAC and its Interest Rate Benchmark Reform Subcommittee for providing the Commission with a well-reasoned and thoughtful approach to educating market participants about the consequences of continuing to use LIBOR based products. Many thanks to the subcommittee for their hard work on this important contribution to the benchmark reform effort,” CFTC Commissioner Rostin Behnam, who is the sponsor of MRAC, said.
This is the subcommittee’s first recommendation in connection with the transition of U.S. dollar derivatives and related contracts away from LIBOR. The transition away from LIBOR is expected to go through 2021. LIBOR is used extensively in the U.S. and around the world as a benchmark rate to set interest rates for various commercial and financial contracts.
The disclosures will now be submitted to the CFTC for consideration.