The Commodity Futures Trading Commission (CFTC) recently issued a final rule modifying its interest rate swap clearing requirement regarding London Interbank Offered Rate (LIBOR).
The action, issued as part 50 of the CFTC’s regulations, removes the requirement to clear LIBOR interest rate swaps, in addition to certain other interbank offered rates, replacing them with requirements to clear interest rate swaps referencing overnight, risk-free reference rates.
“The adoption of the final interest rate swap clearing requirement is another important milestone in the years-long global effort to facilitate a smooth transition away from reliance on LIBOR and other IBORs,” CFTC Chairman Rostin Behnam said. “The final rule promotes financial stability and mitigates systemic risk. As we focus our collective efforts on the fast approaching end of LIBOR, this rule provides legal certainty and regulatory transparency for DCOs, market participants, and our fellow international authorities.”
According to Benham, the ruling ensures cross-border harmonization in the interest rate swaps market.
“Many thanks to the staff of the Division of Clearing and Risk for their hard work on this important contribution to the LIBOR transition effort,” Benham said.
The final rule amends CFTC Regulation 50.4(a) and becomes effective 30 days after publication in the Federal Register.