FCA to allow the publication of Synthetic US Dollar LIBOR for a shirt period
The Financial Conduct Authority (FCA) has approved the calculation of the three US dollar LIBOR settings by the ICE Benchmark Administration Limited (IBA), using “the relevant CME Term Secured Overnight Financing Rate (SOFR) Reference Rate plus the respective ISDA fixed spread adjustment.” FCA’s Monday statement said that the overnight and 12-month US dollar LIBOR settings […] The post FCA to allow the publication of Synthetic US Dollar LIBOR for a shirt period appeared first on LeapRate.
The Financial Conduct Authority (FCA) has approved the calculation of the three US dollar LIBOR settings by the ICE Benchmark Administration Limited (IBA), using “the relevant CME Term Secured Overnight Financing Rate (SOFR) Reference Rate plus the respective ISDA fixed spread adjustment.”
FCA’s Monday statement said that the overnight and 12-month US dollar LIBOR settings will permanently cease after their publication on June 30, 2023. However, the regulator has already ceased the publication of the 1 and 6-month synthetic sterling LIBOR settings, with the final publication occurring on 31 March, 2023.
Since January 1, 2022, the FCA has required the IBA to publish the one, three, and six-month synthetic sterling LIBOR settings. The three-month setting will also be terminated on Thursday, March 28, 2024, according to the regulator, with the other versions having already ceased.
The UK financial regulator emphasized that the use of synthetic LIBOR is only a temporary measure and urged companies to continue transitioning away from the US dollar benchmark. The regulator also clarified that the listed US dollar settings can be used for all legacy contracts, except cleared derivatives.
The FCA said:
We intend that publication of the 1-, 3- and 6-month synthetic US dollar LIBOR settings will cease on 30 September 2024. We will review our decision, in line with the requirements of the Benchmarks Regulation. However, unless unforeseen and material events were to happen, we expect to follow the direction and timeline we have indicated. We consider providing early notice of this is helpful for market participants.
The FCA’s decision comes four months after the regulator launched the consultation on the matter. The FCA further stated that the permission will take effect from July 1, 2023. However, the use of synthetic US dollar LIBOR will be limited to existing settings, and no new use will be permitted.
The post FCA to allow the publication of Synthetic US Dollar LIBOR for a shirt period appeared first on LeapRate.
