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Regulators, exchanges mark key dates in GBP LIBOR transition for cleared derivatives

Planned transition to certain risk-free rates by the end of 2021 is ongoing

21 April 2021

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A number of key dates and recommendations have been issued recently regarding the cessation of LIBOR and the planned transition to certain risk-free rates by the end of 2021:
 

  • On 5 March, the UK's Financial Conduct Authority confirmed that most LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after 31 December 2021.
  • To support this transition, LCH issued a circular on 18 March related to the adoption of risk-free rates in place of LIBOR in certain outstanding contracts.
  • On 22 March, ICE Futures Europe published its own LIBOR transition fallback proposals which ICE has confirmed are now final.
  • On 26 March, the FCA and Bank of England's Prudential Regulatory Authority issued a 'Dear CEO' letter to further outline its expectations for firms' preparations for the cessation of LIBOR and transition to alternative risk-free rates.
  • The FCA and Bank of England said on 29 March that they "encourage" liquidity providers in the sterling non-linear derivatives market to adopt new quoting conventions for inter-dealer trading based on SONIA instead of LIBOR from 11 May.
  • The Working Group on Sterling RFR has produced "The path to ending new use of GBP Libor derivatives" that recommends ceasing origination of new GBP Libor derivatives that expire after the end of 2021, except for the risk management of existing positions.

A comprehensive timeline of work to date on the LIBOR transition and potential future milestones is available on the Bank of England's website. Market participants can find more information about ongoing transition initiatives and actions the FCA are taking to facilitate the transition here.

With the bulk of US dollar LIBOR tenors not set to cease publication until June 2023, there has been less urgency to provide similar transition guidance to alternative reference rates for USD LIBOR.

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