CFTC Selects December 13 for SOFR First for Additional Cross-Currency Derivatives

The Market Risk Advisory Committee (MRAC) of the Commodity Futures Trading Commission (CFTC) has selected December 13 to switch interdealer trading conventions from LIBOR to the Secured Overnight Financing Rate (SOFR) for the U.S. dollar (USD) leg of newly-executed cross-currency derivatives under the MRAC's SOFR First initiative.

SOFR First is a phased initiative adopted in July 20201​ for switching trading conventions from LIBOR to SOFR for U.S. Dollar linear interest rate swaps, cross currency swaps, non-linear derivatives and exchange traded derivatives.

As adopted, the second phase of SOFR First, involving the transitioning of cross-currency derivatives, was comprised of two parts. Part I recommended cross-currency swaps referencing USD, Swiss Franc (CHF), Japanese Yen (JPY), and British Pound (GBP) utilize risk-free reference rates (RFRs) in each currency instead of LIBOR as of September 21, 2021. Part II is intended to address the transition of other currencies at a later date.

SOFR First for additional cross-currency derivatives is Part II of SOFR First's second phase and is recommended to occur on December 13, 2021. This recommendation is intended to capture the USD leg of all other cross-currency derivative transactions, regardless of the accompanying non-USD currency leg.

Specifically, starting on December 13, 2021, interdealer brokers are encouraged to change the USD leg of newly-executed cross-currency derivatives from USD LIBOR to SOFR.