IOSCO Statement
on USD LIBOR Alternatives

The IOSCO issued a statement regarding replacements to USD LIBOR which included warnings about the misuse of Term SOFR and Credit Sensitive Rates.

The board conducted a review of two credit sensitive rates (AMERIBOR and BSBY) and concluded they "exhibit some of the same 'inherent weaknesses' as LIBOR...absent modification, their use may threaten market integrity and financial stability."

While IOSCO had fewer concerns about Term SOFR, they warned that they were suitable for limited use only "so that these rates can remain sustainably available for limited appropriate use cases. If reference to Term SOFR rates were to become too widespread, at the expense of trading in the underlying SOFR derivatives (i.e., futures or swaps) markets, it would undermine the Term SOFR rates themselves."

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Principia Partners LLC provides solutions for derivative and fixed income operations. Global financial institutions and independent asset managers have used the award-winning Principia Analytic System since 1995 to unify valuations, portfolio management, risk surveillance, hedge accounting and operational control across the breadth of fixed income and derivative products. In 2015, Principia launched its Analytic Service, pasVal, to make its award-winning pricing and analytics available to an even broader range of businesses.