CFTC Selects November 8 for SOFR First
for Non-Linear Derivatives

The next and penultimate phase in the SOFR First initiative as recommended by the Market Risk Advisory Committee (MRAC) to the Commodities and Futures Trading Commission (CFTC), has been selected to begin on November 8th, 2021. This phase will cover non-linear derivatives such as swaptions, caps and floors.

You can read the announcement here. From November 8th, "interdealer brokers are encouraged to change USD non-linear derivatives to SOFR, and dealers are encouraged to specify physical settlement for SOFR-based swaptions until a benchmark for SOFR swap rates is published in a tradeable form and ISDA publishes updated settlement provisions for the USD SOFR ICE Swap Rate."

The next and final phase of this initiative is expected to cover exchanged-traded and all other LIBOR-based products not covered in the other three phases. The initiative resolves that interdealer brokers replace trading of specific LIBOR-based product types with SOFR-based products.

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